HOLLYWOOD MEDIA CORP

Pursuant to the Assignment, Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s membership interest in Project Hollywood in exchange for total consideration of $1,800,000 (the “Project Hollywood Purchase Price”). The Project Hollywood Purchase Price has been paid as follows: (1) $1,230,500 in cash (which has been paid by Baseline Holdings to Hollywood Media), (2) Mr. Rubenstein waived his right to receive any future principal and interest owed by Key Brand to Hollywood Media pursuant to the $8,500,000 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, Ms. 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 the Loan). Hollywood Media recorded the fair value of the waivers by Mr. Rubenstein and Ms. Silvers in the long term portion of “Other Assets” in the accompanying unaudited condensed consolidated December 31, 2012 balance sheet. On August 8, 2013, Hollywood Media received a total of $16,611,738 from Key Brand which included $13,861,738 for the prepayment in full of the Loan, and, as a result, the fair value of the aforementioned waivers was $0 at September 30, 2013. For more information about this transaction, see Note 3, “Discontinued Operations” to these unaudited condensed consolidated financial statements. As described above, Hollywood Media acquired its membership interest in Project Hollywood on October 27, 2011 for $1,250,000.

As described above, on August 28, 2012, Hollywood Media entered into “the Assignment” with Baseline Holdings, Project Hollywood, Mr. Rubenstein and Ms. Silvers. Baseline Holdings is wholly-owned by Mr. Rubenstein and Ms. Silvers.  Pursuant to the Assignment, Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s membership interest in Project Hollywood in exchange for total consideration of $1,800,000 (the “Project Hollywood Purchase Price”), which interest Hollywood Media had acquired on October 27, 2011 for $1,250,000.  The Project Hollywood Purchase Price was paid as follows: (1) $1,230,500 in cash (which was paid by Baseline Holdings to Hollywood Media), (2) Mr. Rubenstein waived his right to receive any future principal and interest owed to Hollywood Media pursuant to the Loan under the Credit Agreement (as of August 28, 2012, Mr. Rubenstein had the right to receive 4.76% of the principal, or $404,600, and interest on account of the Loan under the Credit Agreement), and (3) Ms. Silvers waived her right to receive any future principal and interest owed to Hollywood Media under the Loan under the Credit Agreement (as of August 28, 2012, Ms. Silvers has the right to receive 1.94% of the principal, or $164,900, and interest on account of the Loan under the Credit Agreement).  Hollywood Media recorded the fair value of the waivers by Mr. Rubenstein and Ms. Silvers in the long term portion of “Other Assets” in the accompanying unaudited condensed consolidated December 31, 2012 balance sheet. On August 8, 2013, Hollywood Media received a total of $16,611,738 from Key Brand which included $13,861,738 for the prepayment in full of the Loan, and, as a result, the fair value of the aforementioned waivers was $0 at September 30, 2013. For more information about this transaction, see Note 3, “Discontinued Operations” to these unaudited condensed consolidated financial statements.

Hollywood Media initially recorded the Second $7 Million Earnout at a fair value of $4,500,000, which reflected a $2,500,000 discount.  Hollywood Media amortized the $2,500,000 discount under the effective interest method through August 8, 2013 at which time the Loan was paid in full (as described below). 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 contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Prior to the repayment of the Loan and redemption of the Warrant on August 8, 2013, 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 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 $6,461,538 at December 31, 2012. On August 8, 2013, Hollywood Media received a total of $16,611,738 from Key Brand consisting of $13,861,738 from the prepayment of the Loan and $2,750,000 for the redemption in full of the Warrant.

Accretion of discount, net of the reversal of previously recorded allowance for bad debt, was $702,608 and $118,361 on the $8,500,000 portion of the Loan during the nine and three months ended September 30, 2013.

Net cash provided by investing activities during Y3-13 was $17,625,671 primarily attributable to Hollywood Media receiving a total of $16,611,738 from Key Brand on August 8, 2013, consisting of $13,861,738 from the repayment of the Loan and $2,750,000 from the redemption of the Warrant under the Transaction Agreement and cash received on the Loan (prior to prepayment). By comparison, net cash provided by investing activities during Y3-12 was $4,299,789 primarily attributable to: (1) $1,230,500 cash received in connection with the assignment and assumption of Hollywood Media’s membership interest in Project Hollywood; (2) $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.