What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-31 compared with 2013-04-01 · 24 added, 1069 removed, 0 unchanged (100% of the section changed)

Market for Registrant’s Common Equity,

Related Stockholder Matters and Issuer Purchases of Equity

Market for Common Stock

Media’s common stock trades on The NASDAQ Global Market under the symbol HOLL.

The following table sets forth, for each

of the periods indicated, the high and low sales prices per share of Hollywood Media’s common stock as reported by the NASDAQ

Global Market based on published financial sources.

Year Ended December 31, 2011

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year Ended December 31, 2012

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

of Common Stock

of March 19, 2013, there were 106 record holders of Hollywood Media’s common stock.

Media has never paid cash dividends on its common stock and currently intends to retain any future earnings to finance its operations

and the expansion of its business.

Any future determination to pay cash dividends will be at the discretion of the Board of Directors

and will be dependent upon Hollywood Media’s earnings, capital requirements and financial condition and such other factors

deemed relevant by the Board of Directors.

On February 25, 2011,

Hollywood Media completed its tender offer and purchased 8 million shares of its common stock at a price of $2.05 per share (less

any applicable withholding taxes and without interest).

For additional information see Liquidity and Capital Resources

in Item 7 –

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Sales of Unregistered Securities

Hollywood Media did

not issue any securities during the year ended December 31, 2012, in transactions that were not registered under the Securities

Issuer Repurchases

of Equity Securities

Hollywood Media reported

in its Form 8-K report filed on October 4, 2007, that its Board of Directors authorized a stock repurchase program under which

Hollywood Media may use up to $10 million of its cash to repurchase shares of its outstanding common stock.

The stock repurchase

program was approved by Hollywood Media’s Board of Directors on September 28, 2007 and was initially announced via press

release on October 1, 2007.

Pursuant to the stock

repurchase program, Hollywood Media is authorized to purchase shares of its common stock from time to time on the open market

or in negotiated transactions.

The purchases are to be funded from available cash and cash equivalents, and the timing and amount

of any shares repurchased will be determined by Hollywood Media’s management based on its evaluation of financial and market

conditions, legal requirements and other factors.

The stock repurchase program has no time limit and may be suspended for periods

or discontinued at any time, and there is no guarantee as to the number of shares that will be purchased or the amount of cash

to be utilized for purchases under the stock repurchase program.

Repurchased shares will become authorized but unissued shares

of Hollywood Media’s common stock.

following table provides information with respect to common stock purchases by Hollywood Media during the fourth quarter of 2012.

For additional information relating to the stock repurchase program, see “Liquidity and Capital Resources”

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

Total Number of

Shares Purchased

Dollar Value of Shares

as Part of Publicly

that May Yet Be

Total Number of

Average Price

Announced Plans

Purchased Under the

or Programs (1)

October 1, 2012 through October 31, 2012

November 1, 2012 through November 30, 2012

December 1, 2012 through December 31, 2012

$ 2,673,261 (3)

(1) As stated above, Hollywood Media reported in its Form 8-K report

filed on October 4, 2007, that its Board of Directors authorized a

stock repurchase program under which Hollywood Media may use up to

$10 million of its cash to repurchase shares of its outstanding common

The stock repurchase program was approved by Hollywood Media’s

Board of Directors on September 28, 2007 and was initially announced

via press release on October 1, 2007.

The stock repurchase

program has no time limit and may be suspended for periods or discontinued

at any time, and there is no guarantee as to the number of shares

that will be purchased or the amount of cash to be utilized for purchases

under the stock repurchase program.

(2) Includes a broker commission of $508.

(3) As of December 31, 2012, calculated

by subtracting (i) the total price paid for all shares purchased under

the stock repurchase program from inception through December 31, 2012,

or $7,326,739, from (ii) the $10 million potential maximum dollar

value of repurchases approved under the life of the stock repurchase

Authorized for Issuance Under Equity Compensation Plans.

For information regarding

the securities authorized for issuance under our equity compensation plans, please see Item 12 of Part III of this Annual Report

on Form 10-K.

Performance Graph

Not applicable.

Selected Financial Data .

Not applicable.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations .

The following discussion

and analysis should be read in conjunction with Hollywood Media’s Consolidated Financial Statements and the Notes to Consolidated

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

Until December 15,

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

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

development license fees and royalties.

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

Direct and Theatre.com.

On December 15, 2010, we completed the Broadway Sale through the sale of all of the outstanding capital

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

Following this sale, our business segments for

our continuing operations are as follows:

Sales –

includes Hollywood

Media’s 26.2%

equity interest

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

on lobby display

posters, movie

brochure booklets

and ticket wallets

distributed in

cinemas, live theater

and other entertainment

venues in the U.K.

Note 5, “Discontinued

Operations”

in the Notes to

the Consolidated

Financial Statements

contained in Part

II, Item 8 of this

Annual Report on

Form 10-K for information

on the sale of

Cinemasource UK

Properties –

owns or controls

the exclusive rights

to certain intellectual

properties created

by best-selling

authors and media

celebrities, which

it licenses for

book and other

includes our wholly-owned

subsidiary, Tekno

Books, a book development

business, and this

segment does not

include our 50%

interest in NetCo

Partners, for purposes

of this discussion

and analysis.

are beginning a

reorientation process

of this business

from print to digital

distribution.

comprised of payroll

and benefits for

corporate and administrative

personnel as well

as other corporate-wide

expenses, such

as legal fees,

audit fees, proxy

costs, insurance,

centralized information

technology, and

includes consulting

and other fees

and costs relating

to compliance with

the provisions

of the Sarbanes-Oxley

Act of 2002 that

require Hollywood

Media to assess

and report on internal

control over financial

reporting, and

related development

August 28, 2012,

this segment also

included Hollywood

Media’s equity

interest in Project

Hollywood LLC (“Project

Hollywood”)

(which was reduced

from 21.74% of

the total equity

in Project Hollywood

to 20.65% of the

total equity in

Project Hollywood

at June 30, 2012),

which in turn owns

28, 2012 Hollywood

Media assigned

Baseline Holdings

all of Hollywood

Media’s membership

interest in Project

Hollywood in exchange

for certain consideration.

For additional

information on

the assignment

of Hollywood Media’s

interest in Project

Hollywood and the

change in Hollywood

Media’s equity

interest in Project

Hollywood, see

Note 18, “Related

Party Transactions”

in the Notes to

the Consolidated

Financial Statements

included in Part

II, Item 8 of this

Annual Report on

ended December 31, 2012 (“fiscal 2012”) as compared to the year ended December 31, 2011 (“fiscal 2011”).

The results of continuing

operations include application of accounting principles to reflect the discontinued operations resulting from the sale of the

Cinemasource UK Limited Business in fiscal 2012.

In addition, Hollywood Media sold the Broadway Ticketing Business in fiscal 2010

and the Hollywood.com Business in fiscal 2008.

The sales of the Cinemasource UK Limited, Broadway Ticketing and Hollywood.com

are described below.

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.

Hollywood Media received such

payments in accordance with the payment terms.

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 “Note receivable, current”

and the long-term portion of the non-interest bearing loan

is included in “Note 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.

Sale of Broadway Ticketing Business

Unit to Key Brand Entertainment, Inc.

On December 15, 2010,

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 from Key Brand pursuant

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

which Hollywood Media made a $8,500,000 loan to Key Brand (the “Loan”), which Loan accrued interest at a rate of 12%

per annum, matured on December 15, 2015 and was 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 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 “JPM Intercreditor

Agreement”) which defined 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.

On March 14, 2011,

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

working capital as of the closing date of the Broadway Sale determined in the manner described in the Purchase Agreement.

to such 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 delivered at closing by Key Brand.

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

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

in the accompanying consolidated statements of operations

for the year ending December 31, 2011.

April 2012 Amendments

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

On April 22, 2012,

Hollywood Media entered into Amendment No.

4 to the Purchase Agreement (the “Fourth Purchase Agreement Amendment”).

Pursuant to the Fourth Purchase Agreement Amendment, Hollywood Media 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

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 $150,000,000 to $123,000,000 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 such Second $7 Million Earnout amount was

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 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 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 will

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

in the accompanying consolidated statements

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

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

On April 22, 2012,

Hollywood Media entered into Amendment No.

1 to the Credit Agreement (the “First Credit Agreement Amendment”).

to the First Credit Agreement Amendment, Hollywood Media consented to certain amendments to the Credit Agreement, including consent

to the Group Sales Contribution 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 $15,000,000 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,

Hollywood Media entered into Amendment No.

2 to the Credit Agreement (the “Second Credit Agreement Amendment”).

to the Second Credit Agreement 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 Terido 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 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.

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.

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 at December 31, 2012 was $700,000.

In connection with

the Second Credit Agreement Amendment, the Terido Intercreditor Agreement and the amendment to the Warrant 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.

For additional information

about this transaction, see Note 5 “Discontinued Operations”

in the Notes to the Consolidated Financial Statements

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

Sale of Hollywood.com

Business to R&S Investments, LLC

On August 21, 2008,

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

(“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.

For additional information

about this transaction, see Note 5 “Discontinued Operations”

in the Notes to the Consolidated Financial Statements

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

Results of Continuing Operations

The following tables

summarize changes in Hollywood Media’s revenue and operating expense from continuing operations by reportable segment for

the years ended December 31, 2012 and 2011.

For additional financial information regarding Hollywood Media’s reportable

segments, see Note 16 “Segment Reporting”

in the Notes to Consolidated Financial Statements contained in Part II,

Item 8 of this Annual Report on Form 10-K.

Net Revenues Analysis

(in millions)

Intellectual Properties

Operating Expense Analysis

Operating Expenses

(in millions)

Intellectual Properties

Comparison of Percentage

Changes in Net Revenues and Operating Expenses

Increase/(Decrease) in -

Intellectual Properties

Note Regarding Known Material Trends,

Uncertainties and Opportunities Impacting Hollywood Media

Hollywood Media expects

to have continuing losses in the near term.

Notwithstanding these losses, as described below under “Liquidity and Capital

Resources,”

Hollywood Media expects that it will be able to satisfy its near term liquidity obligations.

Other than the

normal seasonal variance described under “Inflation and Seasonality,”

Hollywood Media does not expect that there will

be a significant variance in its earnings or its cash flows in the near term and accordingly does not expect its trend of losses

to accelerate.

The United States

and global economic downturn, which could adversely affect business and personal discretionary spending is an uncertainty along

with other factors that can have or are reasonably likely to have a material impact on Hollywood Media’s revenues, earnings

and liquidity.

Total net revenues

for fiscal 2012 were $0.6 million compared to $1.1 million for fiscal 2011.

Net revenues decreased $0.5 million, or 45% in fiscal

2012 from fiscal 2011.

The decrease in net revenues for fiscal 2012 as compared to fiscal 2011 is the result of decreases in Intellectual

Property revenue.

The decrease in net

revenues in fiscal 2012 as compared to fiscal 2011 was attributable to the timing of the delivery of manuscripts.

The Intellectual

Properties division generates revenues from several different activities including book development and licensing, and intellectual

property licensing.

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

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

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

see “Equity in Earnings of Unconsolidated Investees”

Equity in Earnings of Unconsolidated

Equity in earnings

(losses) of unconsolidated investees consists of the following:

For the years ended December 31,

(in millions)

NetCo Partners (a)

MovieTickets.com (b)

Project Hollywood LLC(c)

NetCo Partners owns

NetForce and is primarily engaged in the development and licensing of NetForce .

NetCo Partners recognizes revenues

when the earnings process has been completed based on the terms of the various agreements, generally upon the delivery of the

manuscript to the publisher and at the point where ultimate collection is substantially assured.

When advances are received prior

to completion of the earnings process, NetCo Partners defers recognition of revenue until the earnings process has been completed.

Hollywood Media owns 50% of NetCo Partners and accounts for its investment under the equity method.

Hollywood Media’s 50%

share of income of NetCo Partners was de minimus for fiscal 2012 and 2011.

(b) MovieTickets.com

Hollywood Media owns

26.2% of the total equity in the MovieTickets.com joint venture.

Hollywood Media records its investment in MovieTickets.com under

the equity method of accounting, recognizing its percentage interest in MovieTickets.com’s income or loss as equity in earnings

of unconsolidated investees.

Under applicable accounting principles, Hollywood Media recorded a $0.3 million loss and $0.4 million

in income from its investment in MovieTickets.com for fiscal 2012 and 2011, respectively.

Hollywood Media did not record $33,034

of its share of losses from MovieTickets.com for fiscal 2012 because accumulated dividends and net losses from 2012 and prior

years exceeded the Company’s investment in MovieTickets.com as of December 31, 2012.

During 2012 and 2011 the Company determined

that $3.6 million and $4.8 million, respectively of the goodwill associated with MovieTickets.com should be written down and accordingly,

recorded impairment losses of $3.6 million and $4.8 million, respectively.

See Note 13, “Investments in and Advances to

Equity Method Unconsolidated Investees”

in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of

this Annual Report on Form 10-K for additional information about the impairment losses of $3.6 million and $4.8 million.

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.

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.

MovieTickets.com is

one of the leading destinations for the purchase of movie tickets through the Internet.

Hollywood Media launched the MovieTickets.com

website in May 2000 with several major movie theater exhibitors.

The MovieTickets.com website allows users to purchase movie tickets

and retrieve them at “will call”

windows or kiosks at theaters or the user can print at home for theatres with that

The website generates revenues primarily from service fees charged to users for the purchase of tickets, the sale of

advertising and the sale of research data.

Service fees on ticket sales were introduced in November 2000.

See Item 1 –

and Note 13, “Investments in and Advances to Equity Method Unconsolidated Investees”

in the Notes to Consolidated

Financial Statements for additional information about MovieTickets.com.

On October 27, 2011,

Hollywood Media acquired 21.74% of the total equity in Project Hollywood, which owns Baseline StudioSystems for $1,250,000.

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”

in the Notes to the Consolidated

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

Under applicable

accounting principles, Hollywood Media recorded $0.1 million in income from its investment in Project Hollywood for fiscal 2011.

This does not include the gain on the Assignment which was approximately $0.7 million recorded in “Other, net”

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

Operating Expenses

Editorial, Production, Development

and Technology.

Editorial, production, development and technology costs include fees and royalties paid to authors and co-editors

for the Intellectual Properties segment.

Editorial, production, development and technology costs for fiscal 2012 were essentially

unchanged at $0.6 million as compared to $0.7 million for fiscal 2011.

Selling, General

and Administrative.

Selling, general and administrative (“SG&A”) expenses consist of occupancy costs, professional

legal and consulting service fees, telecommunications costs, general insurance costs and selling and marketing costs (such as

advertising, marketing, promotional, business development, public relations, and commissions due to other parties).

SG&A expenses for fiscal 2012 were essentially unchanged at $2.9 million compared to $2.8 million for fiscal 2011.

expenses include legal fees of approximately $0.8 million in fiscal 2012.

Payroll and Benefits.

Payroll and benefits

expenses consist of payroll and benefits including any other types of compensation benefits as well as human resources and administrative

Payroll and benefits expenses

for fiscal 2012 were $2.7 million as compared to $3.2 million for 2011, a decrease of $0.5 million or 16%.

On October 1,

2012, Hollywood Media received the first $7 million tranche of the earnout pursuant to the Broadway Sale.

pursuant to existing employment agreements, Mr.

Rubenstein received $405,300 of such earnout payment and Ms.

Silvers received

$165,200 of such earnout payment on October 5, 2012 which were recorded as payroll expense in the fourth quarter of fiscal

Following such payments, Hollywood Media has no further obligation to Mr.

Rubenstein and Ms.

Silvers in connection with

the Broadway Sale.

Also included in payroll expense for fiscal 2012 is non-cash amortization of deferred compensation in the

amount of $430,000, of which $107,500 was included in the fourth quarter of fiscal 2012.

The decrease in payroll

and benefits in fiscal 2012 as compared to 2011 was primarily due to a decrease in executive payroll of $0.1 million, a decrease

in payroll of the accounting department of approximately $0.1 million and a combined decrease in payroll of human resources, administration,

MIS and legal of approximately $0.3 million.

Depreciation and

Amortization.

Depreciation and amortization

expense consists of depreciation of property and equipment, furniture and fixtures, web site development, leasehold improvements,

equipment under capital leases and amortization of intangibles.

Depreciation and amortization expense was $0.1 million for fiscal

2012 as compared to $0.2 million for fiscal 2011.

Depreciation and amortization decreased $0.1 million or 50% in fiscal 2012 from

The decrease in depreciation and amortization expense from fiscal 2011 to 2012 is due to reduced

leasehold improvements amortization because of a change in location of the corporate office to a smaller and less expensive rental

space and the balance is due to fixed assets becoming fully depreciated during or prior to Q1-11.

Interest, net.

Interest, net was $1.2

million income for fiscal 2012 as compared to $1.0 million income for fiscal 2011.

The increase of $0.2 million or 20% in Interest,

net in fiscal 2012 as compared to fiscal 2011 was primarily attributable to interest received on the second $7 million earnout.

Interest, net is attributable to the Note Receivable due to Hollywood Media from Key Brand Entertainment Inc., the purchaser of

the Broadway Ticketing Division.

The note has an interest rate of 13% per annum (changed from 12% per annum as of December 31,

2012) and matures on June 30, 2015.

For additional information, see Note 5 “Discontinued Operations”

in the Notes to

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

Accretion of Discount,

net of allowance for uncollectability

Accretion of discount,

net was $1.7 million for fiscal 2012.

The $1.7 million balance in Accretion of Discount, net in 2012 was primarily attributable

to the accretion of the discount on the Loan from the Broadway Sale, net of the reversal of previously recorded allowance for bad

Other, net was $2.1

million for fiscal 2012 as compared to $2.0 million for fiscal 2011.

The $2.1 million balance in Other, net in 2012 was primarily

attributable to the assignment of Project Hollywood which resulted in a $0.7 million gain and the increase in the fair value of

the Warrant by $0.7 million.

The $2.0 million balance in Other, net in 2011 was primarily attributable to $1.5 million in proceeds

from key-man life insurance resulting from Dr.

Greenberg’s death as well as the change in the fair value of derivative liabilities

of $0.6 million.

Income Tax Benefit.

The benefit for fiscal

2012 of $5.3 million was fully offset by the income tax expense recognized in the “Gain on sale of discontinued operations,

net of income taxes”

in the Consolidated Statements of Operations contained in Part II, Item 8 of this Annual Report on Form

Net Income (Loss).

Hollywood Media’s

net income for fiscal 2012 was $10.4 million as compared to a net loss for fiscal 2011 of $6.9 million.

The net income for fiscal

2012 was primarily due to a non-cash goodwill impairment charge of $3.6 million, offset by the pre-tax gain on sale of $12.2 million

from the Broadway Sale, $2.3 million from the sale of the Hollywood.com Earnout, accretion of the discount of $1.7 million of the

Note Receivable from Key Brand, and $1.2 million interest income received from the Note Receivable from the Broadway Sale.

net loss for fiscal 2011 was primarily due to a non-cash goodwill impairment charge of $4.8 million, offset by the $1.5 million

in proceeds received from the key-man life insurance resulting from Dr.

Greenberg’s death.

LIQUIDITY AND CAPITAL RESOURCES

Cash Balance at

Sources and Uses of Cash

Hollywood Media’s

cash and cash equivalents were $11.4 million at December 31, 2012 as compared to $3.7 million at December 31, 2011.

Our net working

capital (defined as current assets less current liabilities) was $12.0 million at December 31, 2012 and $3.1 million at December

Net cash used in operating

activities from continuing operations during fiscal 2012 was $3.9 million, an increase of 50% compared to net cash used in operating

activities from continuing operations during 2011 of $2.6 million.

Net cash used in operating activities

during 2012 was primarily attributable to the following:

(1) net income of $10,409,564 and (2) $1,240,000 of interest received

These items were partially offset by:

(1) $3,600,000 non-cash goodwill impairment charge (2) legal fees of $800,000

(3) $430,000 non-cash amortization expense of deferred compensation costs, (4) $136,443 depreciation and amortization (5) cash

provided which included cash received of $7,000,000 on the First $7,000,000 Earnout, $2,950,000 of cash received on the sale of

the Hollywood.com earnout and $1,230,500 of cash received on the sale of Project Hollywood.

By comparison, net cash used in operating

activities during 2011 was $2,595,494.

C ash usage in 2011 was primarily attributable to the loss

from continuing operations and the need for staffing during the Broadway Ticketing post-sale transition period.

As described in Note

5, “Discontinued Operations”

in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this

Annual Report on Form 10-K, on October 1, 2012, following the end of the third quarter period, Hollywood Media received from Key

Brand in connection with the Broadway Sale the First $7 Million Earnout payment in cash.

Further, an additional $7 million representing

the Second $7 Million Earnout payment was added to the Loan under the Credit Agreement as of October 5, 2012, which $7 million

amount is to be amortized with interest at 12% per annum over the period October 5, 2012 through December 15, 2015 in equal quarter-annual

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.

On December 31, 2012, the

interest rate was increased to 13% per annum and the maturity date was moved up to June 15, 2015.

The Loan is secured on a second

lien basis by all stock and assets of Theatre Direct and its subsidiaries.

Hollywood Media 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 will be included

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

in the accompanying consolidated statements of operations

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

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 interest accretion of $288,585, reduced the value of the Second $7 Million Earnout from $4,500,000 to

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

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

Principal and interest

payments on the $7,000,000 portion of the Loan (from the Second Earnout) are expected to be approximately $3,300,000 in 2013.

addition, interest payments on the original $8,500,000 portion of the Loan are expected to be approximately $1,120,000 in 2013.

cash provided by investing activities during fiscal 2012 was $11.7 million, primarily attributable to:

(1) $7,000,000 cash

received in connection with the First $7 Million Earnout;

(2) $1,230,500 cash received in connection with the assignment and assumption

of Hollywood Media’s membership interest in Project Hollywood;

(3) $2,950,000 cash received in connection with the Buyout

Amount from R&S Investments, and (3) Hollywood.com earnout payments of $155,000 paid to the Company.

Net cash used in investing activities during fiscal 2011 was $6.6 million, primarily used to pay Key Brand a working capital adjustment

of $3.7 million in connection with the sale of the Broadway Ticketing Business, a payment of $1.7 million in payroll related bonuses

which became due as a result of the Broadway Sale in fiscal 2010 pursuant to employment agreements, and a $1.25 million payment

for the acquisition of 21.74% of the equity of Project Hollywood.

Net cash used in financing

activities during fiscal 2012 was $0.1 million, which cash usage was primarily attributable to Hollywood Media's stock buy-back

of 16,600 shares of Hollywood Media's common stock and payments under capital leases.

Net cash used in financing activities during

fiscal 2011 was $16.5 million, which cash usage was primarily for the purchase of common stock tendered to and purchased by Hollywood

Media in Hollywood Media’s tender offer.

See Note 6, “Purchase of Common Stock Tendered”

in the Notes to the

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

In connection with the Broadway Sale:

Hollywood Media received $20.5 million in cash (including $0.5 million pursuant to the estimated

working capital adjustment described in the Purchase Agreement);

Hollywood Media, Theatre Direct and Key Brand entered into that certain 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 to the Company $8.5 million at an interest rate of 12% per annum, which obligation matures on December 15, 2015 and is secured

on a second lien basis by all stock and assets of Theatre Direct and its subsidiaries;

Theatre Direct issued the Company 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”);

Key Brand assumed $1.6 million of liabilities associated with employment agreements with certain

employees of Theatre Direct;

Hollywood Media was entitled to receive earnout payments of up to $14 million, in two $7 million

tranches, contingent upon Theatre Direct and its subsidiaries achieving certain revenue targets during the period from the closing

date through the end of the tenth full fiscal year of Theatre Direct 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.

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”

(but not the Broadway.com consumer ticketing business) owned by Key Brand to a newly formed joint venture (the “Group Sales

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 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 revenue target for the Second 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.

to the Credit Agreement, interest at a rate of 12% per annum and principal on such Second $7 Million Earnout will be amortized

over the term of the Credit Agreement in equal quarterly installments, which amortization period commenced on October 5, 2012 and

ends on the maturity date of the Loan which is December 15, 2015.

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.

On December 31, 2012, the interest rate was increased to 13% per annum and the maturity date was

moved up to June 30, 2015.

Hollywood Media recorded the Second $7 Million Earnout at a fair value of $4,500,000, which reflects

a $2,500,000 discount.

Hollywood Media will allocate amounts received under the quarterly principal payments received on

the Second $7 Million Earnout to principal and accretion of discount in order to fully amortize the $2,500,000 discount under the

effective interest method.

Amortization of the $2,500,000 discount, under the effective interest method, will be included

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

in the Consolidated Statements of Operations contained

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

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 and Key Brand’s other lender, JPMorgan Chase Bank, N.A., 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 to Hollywood Media of the Second Earnout amounts

prior to the maturity of the Credit Agreement.

Sale of Hollywood.com Business Unit to

R&S Investments, LLC

On August 21,

2008, Hollywood Media entered into and simultaneously closed on a definitive purchase agreement with R&S Investments, LLC,

pursuant to which R&S Investments acquired the Hollywood.com Business for a potential purchase price of $10.0 million,

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

Since August 21, 2008, $1,892,692 in earnout payments were paid to Hollywood Media.

Hollywood Media also received $2,950,000

in connection with the buy-out of the Hollywood.com earnout by R&S Investments.

For additional information about the Hollywood.com

business transactions and the purchase of the Hollywood.com earnout by R&S Investments, see Note 5 “Discontinued Operations”

in the Notes to Consolidated Financial Statements included in Part I, Item II, Item 8 of this Annual Report on Form 10-K.

Sale of CinemaSource

UK Limited to Orchard Advertising

May 1, 2012, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with Orchard Advertising

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

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

UK Theatres Online Limited, Spring Leisure Limited, Cinemasonline Limited and WWW.CO.UK

Pursuant to the Share

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

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

in twenty equal quarter-annual installments of $12,500 each over a period of five years.

Subject to the terms and conditions of

the Share Purchase Agreement, the first installment of the purchase price was due and was paid to the Company on July 31, 2012

and subsequent installments of the purchase price are due every three calendar months thereafter and have been timely paid.

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

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

As of December 31,

2012, the Company has received all payments on the $250,000 non-interest bearing loan in accordance with the payment terms.

gain on sale is included in “Gain on Sale of Discontinued Operations, net of income taxes”

in the Consolidated Statement

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

The discounted amount of the non-interest bearing

loan is included in “Notes Receivable”

in the Consolidated Balance Sheets contained in Part II, Item 8 of this Annual

Report on Form 10-K.

For additional information

about the sale of CinemaSource UK Limited to Orchard Advertising, see Note 5 “Discontinued Operations”

to the Consolidated Statement of Operations contained in Part II, Item 8 of this Annual Report on Form 10-K.

Purchase of Common

Stock Tendered

On February 25, 2011,

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

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

Hollywood Media

accepted 8 million shares for purchase for a total cost of approximately $16.4 million.

The number of shares properly tendered

and not withdrawn was 24,157,429.

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

tendered shares were withdrawn from the tender offer.

Immediately following the purchase of the tendered shares, Hollywood Media

had approximately 23,179,066 shares outstanding.

Capital Expenditures

Our capital expenditures

during each of 2012 and 2011 were $83,959 and $97,433, respectively.

We currently anticipate capital expenditures in 2013 of approximately

$75,000, including various systems and equipment upgrades.

Authorization of

Stock Repurchase Program

Hollywood Media previously

reported in its current report on Form 8-K filed with the SEC on October 4, 2007, that its Board of Directors authorized a stock

repurchase program under which Hollywood Media may use up to $10 million of its cash to repurchase shares of its outstanding common

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

program for a total cost of $24,582.

In addition, during the first quarter of 2013, 510,700 shares of Hollywood Media’s common

stock were repurchased under the repurchase program for a total cost of $749,966.

Pursuant to the repurchase

program, Hollywood Media is authorized to purchase shares of its common stock from time to time on the open market or in negotiated

transactions.

The purchases are to be funded from available cash and cash equivalents, and the timing and amount of any shares

repurchased will be determined by Hollywood Media’s management based on its evaluation of financial and market conditions,

legal requirements and other factors.

The repurchase program has no time limit and may be suspended for periods or discontinued

at any time, and there is no guarantee as to the number of shares or the amount of cash to be utilized for repurchases.

shares will become authorized but unissued shares of Hollywood Media’s common stock.

Off-Balance Sheet

As of December 31,

2012 and December 31, 2011, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities

often referred to as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance

sheet arrangements or other contractually narrow or limited purposes of the sort contemplated by paragraph 4 of Item 303 of SEC

Regulation S-K.

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

paragraph 4 of Item 303 regarding “off-balance sheet arrangements.”

Critical Accounting

We have identified

the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of

our consolidated financial statements.

The preparation of our consolidated financial statements in conformity with accounting principles

generally accepted in the United States of America requires that we make estimates and judgments that affect the reported amounts

of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

On an on-going

basis, we evaluate our estimates, including those related to asset impairment, accruals for compensation and related benefits,

revenue recognition, allowance for doubtful accounts, and contingencies and litigation.

These estimates are based on the information

that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances.

results could vary from those estimates under different assumptions or conditions.

For additional information about our significant

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

“Summary of Significant

Accounting Policies”

in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report

on Form 10-K.

Derivative Instruments

The Company records

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

reported in earnings in our consolidated results of operations.

The Company does not hold any derivative instruments that reduce

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

as hedge instruments.

Impairment of

Under the Financial

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

350, “Intangibles –

and Other”

(ASC 350), beginning January 1, 2002, goodwill and certain intangibles are no longer amortized;

however, they

are subject to evaluation for impairment at least annually using a fair value based test.

The fair value based test is a two-step

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.

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.

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 consolidated financial statements.

During the three months

ended September 30, 2012, the Company determined that $3.6 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 a total impairment loss of $3.6 million for the year ended

December 31, 2012.

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 a total impairment loss of $4.8

million for the year ended December 31, 2011.

For additional information see Note 13 - “Investments in and Advances to Equity

Method Unconsolidated Investees”

in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual

Report on Form 10-K.

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.

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, 2012 and December 31, 2011 met or exceeded the book value of that reporting

The Company believes

that the disparity between the book value of its assets as compared to the market capitalization of its business is in large part

a consequence of market conditions, including perceived risks in the debt markets, the Company’s industry and the broader

While the Company believes that some of these risks are unique to specific companies, some represent global industry risks.

Company believes that there is no fundamental change in our underlying business model or prospects for our Company.

The Company has evaluated the impairment of its goodwill, giving consideration to these risks, and their impact upon the respective

reporting units’

fair values, and has reported impairments where it deems appropriate.

Inflation and Seasonality

Although we cannot

accurately determine the precise effects of inflation, we do not believe inflation has a material effect on revenue or results

of operations.

We consider our business to be somewhat seasonal and expect net revenues to be generally higher during the second

and fourth quarters of each fiscal year for our Tekno Books book licensing business as a result of the general publishing industry

practice of paying royalties semi-annually.

In addition, although not seasonal, our Intellectual Properties division and NetCo

Partners both experience fluctuations in their respective revenue streams, earnings and cash flow as a result of the amount of

time that is expended in the creation and development of the intellectual properties and their respective licensing agreements.

The recognition of licensing revenue is typically triggered by specific contractual events which occur at different points in time

rather than on a regular periodic basis.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK .

Not applicable.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

is no established public trading market in our common stock, and a regular trading market may not develop, or if developed, may not be

Our securities are currently quoted on the OTC Markets Pink under the symbol “NSTM”.

The following reflect inter-dealer

prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Quarter ended 3/31/2023 (through

March 31, 2023)

Quarter ended 12/31/2022

Quarter ended 9/30/2022

Quarter ended 6/30/2022

Quarter ended 3/31/2022

Quarter ended 12/31/2021

Quarter ended 9/30/2021

Quarter ended 6/30/2021

Quarter ended 3/31/2021

Quarter ended 12/31/2020

Quarter ended 9/30/2020

Quarter ended 6/30/2020

Quarter ended 3/31/2020

of January 25, 2023 there were 46,881,475 shares of common stock outstanding held by approximately 90 record holders.

have not paid cash dividends on any of our capital stock since our name change and business focus shift in 2018 and currently intend

to retain our future earnings, if any, to fund the development and growth of our business.

We do not expect to pay any dividends on

any of our capital stock in the foreseeable future.

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 5. Market for Registrant’s Common Equity