x
|
Preliminary
Proxy Statement
|
¨
|
Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
|
¨
|
Definitive
Proxy Statement
|
¨
|
Definitive
Additional Materials
|
¨
|
Soliciting
Material Pursuant to §240.14a-12
|
Hollywood Media Corp.
|
(Name
of Registrant as Specified in Its Charter)
|
N/A
|
(Name
of Person(s) Filing Proxy Statement if Other Than the
Registrant)
|
¨
|
No
fee required.
|
x
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
(1)
|
Title
of each class of securities to which transaction
applies:
|
Common Stock, par value $.01 per share, of Hollywood Media Corp. | ||
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
Not Applicable | ||
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
|
The
filing fee was determined based on $45,400,000 total consideration
proposed to be paid to Hollywood Media Corp. in the
transaction. The total consideration was based on Hollywood
Media Corp. receiving the following consideration in the transaction (i)
$20 million in cash, (ii) a five-year second lien secured promissory note
in the initial principal amount of $8.5 million at an interest rate of 12%
per annum (valued at $8.5 million for purposes of calculating the filing
fee),
|
|
(iii)
a warrant to purchase 5% of the outstanding shares of common stock of
Theatre Direct NY, Inc. as of the closing date on a fully diluted basis at
an exercise price of $.01 per share (valued at $1 million for purposes of
calculating the filing fee), (iv) earnout payments of up to $14 million,
and (v) an estimated working capital adjustment of $1.9
million. The filing fee was determined by multiplying
0.00007130 by the total consideration proposed to be paid to Hollywood
Media Corp. in the transaction.
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
$45,400,000 | ||
|
(5)
|
Total
fee paid:
|
$3,237.02 | ||
x
|
Fee
paid previously with preliminary materials:
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid:
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
(3)
|
Filing
Party:
|
|
(4)
|
Date
Filed:
|
Sincerely,
|
|
![]() |
|
Mitchell
Rubenstein
|
|
Chairman
and Chief Executive
Officer
|
|
1.
|
To
approve the sale of Hollywood Media’s Broadway Ticketing Division, through
the sale of all of the outstanding capital stock of Theatre Direct NY,
Inc. (“Theatre Direct”) by Hollywood Media to Key Brand Entertainment Inc.
(“Key Brand”) as contemplated by the stock purchase agreement between
Hollywood Media and Key Brand, dated as of December 22, 2009, as amended,
attached as Annex
A to the accompanying proxy statement (the “Stock Purchase
Agreement”). We refer to this proposal as the “Proposal to Sell
Theatre Direct”; and
|
|
2.
|
To
approve the adjournment or postponement of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
Proposal to Sell Theatre Direct. We refer to this proposal as the
“Proposal to Adjourn or Postpone the Special
Meeting.”
|
By
Order of the Board of Directors,
|
|
Laurie
S. Silvers
|
|
President
and Secretary
|
|
Boca
Raton, FL
|
|
[___],
2010
|
SUMMARY
TERM SHEET
|
1
|
|
Parties
to the Stock Purchase Agreement
|
1
|
|
The
Stock Purchase Agreement and The Sale of Theatre Direct
|
2
|
|
Purchase
Price
|
2
|
|
Purchase
Price Adjustments
|
3
|
|
Promissory
Note and Related Agreements
|
3
|
|
Warrant
|
4
|
|
Earnout
|
4
|
|
The
Escrow Agreement and Deposit and Expense Reimbursement
|
5
|
|
Financing
|
5
|
|
Use
of Proceeds from the Sale of Theatre Direct
|
6
|
|
When
the Sale of Theatre Direct is Expected to be Completed
|
7
|
|
Reasons
for the Sale of Theatre Direct
|
7
|
|
Interests
of Certain Persons in the Sale of Theatre Direct
|
9
|
|
Opinion
of Hollywood Media’s Financial Advisor
|
11
|
|
Recommendation
of Our Board of Directors
|
11
|
|
Non-Competition
Agreement
|
12
|
|
Governmental
and Regulatory Approvals
|
12
|
|
Accounting
Treatment
|
12
|
|
Material
U.S. Federal Income Tax Consequences
|
12
|
|
Other
Offers
|
12
|
|
Conditions
to Closing
|
13
|
|
Indemnification
|
14
|
|
Termination
of the Stock Purchase Agreement
|
14
|
|
Termination
Fee
|
15
|
Effects
on Hollywood Media if the Sale of Theatre Direct is Completed and Nature
of Hollywood Media’s Business Following the Sale of Theatre
Direct
|
15
|
|
Effects
on Hollywood Media if the Sale of Theatre Direct is Not
Completed
|
16
|
|
Risk
Factors
|
16
|
|
Ancillary
Agreements
|
16
|
|
Transaction
Costs Associated with the Sale of Theatre Direct
|
16
|
|
The
Special Meeting
|
17
|
|
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
|
18
|
|
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
|
22
|
|
THE
SPECIAL MEETING
|
24
|
|
Time,
Place and Purpose of the Special Meeting
|
24
|
|
Recommendation
of Our Board of Directors
|
24
|
|
Record
Date and Quorum
|
24
|
|
Vote
Required for Approval
|
25
|
|
Shares
Held in “Street Name” by a Broker, Bank or Other Nominee
|
25
|
|
Proxies
and Revocation
|
26
|
|
Adjournments
and Postponements
|
26
|
|
No
Appraisal or Dissenters’ Rights
|
27
|
|
Solicitation
of Proxies
|
27
|
|
Internet
Availability of Proxy Materials
|
27
|
|
Questions
and Additional Information
|
27
|
|
RISK
FACTORS
|
28
|
|
PROPOSAL
#1: PROPOSAL TO SELL THEATRE DIRECT
|
35
|
|
Parties
to the Stock Purchase Agreement
|
35
|
|
Background
of the Sale of Theatre Direct
|
36
|
|
Background
on the Amendments to Amended and Restated Employment Agreements of Mr.
Rubenstein and Ms. Silvers
|
48
|
|
Past
Contacts, Transactions or Negotiations
|
49
|
Reasons
for the Sale of Theatre Direct
|
50
|
|
Opinion
of Hollywood Media’s Financial Advisor
|
52
|
|
Governmental
and Regulatory Approvals
|
60
|
|
When
the Sale of Theatre Direct is Expected to be Completed
|
60
|
|
Effects
on Hollywood Media if the Sale of Theatre Direct is Completed and Nature
of Hollywood Media’s Business Following the Sale of Theatre
Direct
|
61
|
|
Effects
on Hollywood Media if the Sale of Theatre Direct is Not
Completed
|
62
|
|
Use
of Proceeds from the Sale of Theatre Direct
|
62
|
|
No
Appraisal or Dissenters’ Rights
|
63
|
|
Interests
of Certain Persons in the Sale of Theatre Direct
|
63
|
|
Transaction
Costs Associated with the Sale of Theatre Direct
|
67
|
|
Terms
of the Stock Purchase Agreement
|
68
|
|
The
Sale of Theatre Direct
|
68
|
|
Purchase
Price
|
68
|
|
The
Escrow Agreement and Deposit and Expenses Reimbursement
|
74
|
|
Representations
and Warranties
|
75
|
|
Covenants
|
78
|
|
Conditions
to Closing
|
85
|
|
Closing
Date
|
87
|
|
Survival
and Indemnification
|
87
|
|
Termination
|
89
|
|
Miscellaneous
|
91
|
|
Ancillary
Agreements
|
92
|
|
Hollywood
Media Release
|
92
|
|
Transition
Services Agreement
|
92
|
|
Non-Competition
Agreements of Mr. Rubenstein and Ms. Silvers
|
93
|
|
Accounting
Treatment
|
93
|
|
Material
U.S. Federal Income Tax Consequences
|
93
|
PROPOSAL
#2: PROPOSAL TO ADJOURN OR POSTPONE THE SPECIAL MEETING
|
100
|
|
Vote
Required to Approve the Proposal to Adjourn or Postpone the Special
Meeting
|
100
|
|
No
Appraisal or Dissenters’ Rights
|
100
|
|
Recommendation
of Our Board of Directors
|
100
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
101
|
|
SHAREHOLDERS’
PROPOSALS
|
103
|
|
DELIVERY
OF MATERIALS
|
105
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
105
|
|
PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF
|
||
HOLLYWOOD
MEDIA CORP. AND SUBSIDIARIES
|
106
|
|
FINANCIAL
STATEMENTS OF THEATRE DIRECT NY, INC.
|
||
(OUR
BROADWAY TICKETING DIVISION)
|
114
|
|
SELECTED
FINANCIAL DATA OF HOLLYWOOD MEDIA CORP.
|
|
120
|
Annex
A
|
Stock
Purchase Agreement
|
|
Annex
B
|
Terms
of the Promissory Note
|
|
Annex
C
|
Form
of Warrant
|
|
Annex
D
|
Escrow
Agreement
|
|
Annex
E
|
Opinion
of Peter J. Solomon Company
|
|
Annex
F
|
Audited
Consolidated Financial Statements of Hollywood Media Corp. and
Subsidiaries included in Hollywood Media Corp.’s Form 10−K for the period
ended December 31, 2009
|
|
Annex
G
|
Unaudited
Condensed Consolidated Financial Statements of Hollywood Media Corp. and
Subsidiaries included in Hollywood Media Corp.’s Form 10−Q for
the period ended June 30, 2010
|
|
Annex
H
|
Information
About Key Brand Entertainment Inc.
|
|
Annex
I
|
Key
Brand Entertainment Inc.- Management Discussion and Analysis of Results of
Operations and Financial Condition
|
|
Annex
J
|
Pro
Forma Condensed Consolidated Financial Statements of Key Brand
Entertainment Inc.
|
|
Annex
K
|
Selected
Financial Data of Key Brand Entertainment Inc.
|
|
Annex
L
|
Audited
Consolidated Financial Statements of Key Brand Entertainment Inc. and
Subsidiaries for the periods ended December 31, 2009 and December 31,
2008
|
|
Annex
M
|
|
Unaudited
Consolidated Financial Statements of Key Brand Entertainment Inc. and
Subsidiaries for the six month period ended June 30,
2010
|
|
•
|
|
Annex H
– Information About Key Brand Entertainment
Inc.
|
|
•
|
|
Annex I
– Key Brand Entertainment Inc.- Management Discussion and
Analysis of Results of Operations and Financial
Condition
|
|
•
|
|
Annex J
– Pro Forma Condensed Consolidated Financial Statements of Key
Brand Entertainment Inc.
|
|
•
|
|
Annex K
– Selected Financial Data of Key Brand Entertainment
Inc.
|
|
•
|
|
Annex L
– Audited Consolidated Financial Statements of Key Brand
Entertainment Inc. and Subsidiaries for the periods ended December 31,
2009 and December 31, 2008
|
|
•
|
|
Annex M
– Unaudited Consolidated Financial Statements of Key Brand
Entertainment Inc. and Subsidiaries for the period ended June 30,
2010
|
|
•
|
|
$20
million in cash (subject to working capital adjustments described in the
Stock Purchase Agreement) (see “SUMMARY TERM SHEET—Purchase
Price Adjustment” beginning on page
3);
|
|
•
|
|
a
five-year second lien secured promissory note issued by Key Brand in the
initial principal amount of $8.5 million at an interest rate of 12% per
annum;
|
|
•
|
|
a
warrant to purchase 5% of the outstanding shares of common stock of
Theatre Direct on a fully diluted basis as of the closing date of the sale
of Theatre Direct at an exercise price of $.01 per
share;
|
|
•
|
|
earnout
payments of up to $14 million contingent upon Theatre Direct and its
subsidiaries achieving certain revenue targets during the Earnout Period
(as defined in “SUMMARY
TERM SHEET—Earnout” beginning on page 4);
and
|
|
•
|
|
up
to a maximum amount of $1.6 million of liabilities with respect to any
payment associated with change of control obligations under the employment
agreements with certain employees of Theatre Direct will be or remain the
liabilities of Theatre Direct from and after the closing date of the sale
of Theatre Direct.
|
|
•
|
|
if
the working capital as reflected on this estimated statement exceeds
$500,000, then the cash consideration of $20 million to be delivered at
closing will be adjusted upward by such difference;
and
|
|
•
|
|
if
the working capital as reflected on this estimated statement is less than
$500,000, then the cash consideration of $20 million will be adjusted
downward by such difference.
|
|
•
|
|
if
Theatre Direct’s working capital set forth on the closing statement is
greater than the working capital set forth on the estimated statement
described above, then Key Brand shall pay Hollywood Media the amount of
the difference plus accrued interest at the prime rate on such difference;
and
|
|
•
|
|
if
Theatre Direct’s working capital set forth on the closing statement is
less than the working capital set forth on the estimated statement
described above, then Hollywood Media shall pay Key Brand the amount of
the difference plus accrued interest at the prime rate on such
difference.
|
|
•
|
|
the
Promissory Note will accrue interest at the rate of 12% per annum with
interest payable quarterly in cash;
|
|
•
|
|
the
Promissory Note will be payable in full on the fifth anniversary of the
closing date of the transactions contemplated by the Stock Purchase
Agreement;
|
|
•
|
|
the
obligations of Key Brand under the Promissory Note will be secured on a
second priority basis by:
|
|
•
|
|
a
perfected pledge of the capital stock of Theatre Direct and each direct or
indirect subsidiary of Theatre Direct (subject, in the case of any foreign
direct subsidiary, to a pledge of 65% of the capital stock of such foreign
subsidiary); and
|
|
•
|
|
a
perfected security interest in substantially all tangible and intangible
assets of Theatre Direct and each direct or indirect US domestic
subsidiary of Theatre Direct (including equipment, investment property,
intellectual property, other general intangibles, real property and
proceeds of the foregoing);
|
|
•
|
|
the
obligations under the Promissory Note and the security interest of
Hollywood Media securing the obligations of Key Brand under the Promissory
Note will be subordinated to senior indebtedness, including amounts
outstanding under that certain Credit, Security, Pledge and Guaranty
Agreement, dated as of January 23, 2008, by and among, inter
alios, Key Brand, JPMorgan Chase Bank, N.A., Toronto Theater Ltd.,
and the guarantors and lenders named therein, as amended by Amendment No.
1 to Credit Agreement, dated as of August 22, 2008, and Amendment No. 2,
dated as of December 23, 2009 (as may be amended or modified from time to
time, the “Credit Agreement”), up to an aggregate amount of $15 million
plus all interest accrued thereon from and after the closing of the
transactions contemplated by the Stock Purchase
Agreement;
|
|
•
|
|
upon
any adverse change in state or federal ticketing regulations that takes
effect within two years of the closing of the transactions contemplated by
the Stock Purchase Agreement that restricts or limits
the
|
|
•
|
|
the
obligations of Key Brand under the Promissory Note will accelerate and
become immediately due and payable upon any event of default under the
Promissory Note or a “change of control” of Key Brand or Theatre
Direct.
|
|
•
|
|
the
Warrant may be exercised by Hollywood Media, in whole and not in part,
upon the consummation or occurrence of certain transactions and events
described in the Warrant;
|
|
•
|
|
at
any time after the first (1st) anniversary of the issue date of the
Warrant, Theatre Direct may elect to redeem the Warrant (or the shares of
common stock of Theatre Direct issued upon exercise of the Warrant), in
whole and not in part, by paying to Hollywood Media an amount equal to the
greater of (x) the aggregate fair market value (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase Agreement—Purchase
Price—Warrant” beginning on page 70) of the shares of common stock
of Theatre Direct issuable upon exercise of the Warrant and (y) $1
million; and
|
|
•
|
|
at
any time after the seventh (7th) anniversary of the issue date of the
Warrant, Hollywood Media may elect to put the Warrant, in whole and not in
part, to Theatre Direct in exchange for a payment by Theatre Direct to
Hollywood Media in an amount equal to the greater of (x) the aggregate
fair market value (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase Agreement—Purchase
Price—Warrant” beginning on page 70) of the shares of common stock
of Theatre Direct issuable upon exercise of the Warrant, and (y) $1
million.
|
|
•
|
|
pay
a one-time special cash dividend to our shareholders of approximately
$0.60 per share of Hollywood Media common stock, totaling approximately
$18 million; or
|
|
•
|
|
engage
in a self-tender offer to purchase shares of Hollywood Media common stock
at a per-share price to be determined in the future, totaling
approximately $18 million.
|
|
•
|
|
we
are not required to pay a one-time special cash dividend or engage in a
self-tender offer;
|
|
•
|
|
our
board of directors has made no final decision whether to pay a one-time
special cash dividend or engage in a self-tender offer, and such decision
will be based on what our board of directors determines is in our best
interest and the best interest of our shareholders (subject to compliance
with Florida law and federal laws and
regulations);
|
|
•
|
|
if
our board of directors determines to pay a one-time special cash
dividend:
|
|
•
|
|
the
actual amount of such one-time special cash dividend may be lower or
higher than the amount described above depending on the amount of our
liabilities following the sale of Theatre Direct and other
factors;
|
|
•
|
|
the
timing of the payment of a one-time special cash dividend may vary
depending on a number of factors, including any contingent liabilities or
other unforeseen matters;
|
|
•
|
|
prior
to making such one-time special cash dividend, we will announce, at least
ten days in advance, the record date for such distribution;
and
|
|
•
|
|
only
holders of Hollywood Media’s common stock on the record date for a
one-time special cash dividend will be entitled to receive a one-time
special cash dividend (please note that the record date for such one-time
special cash dividend will be after the closing date of the sale of
Theatre Direct and is different from the record date for determining which
holders of Hollywood Media’s common stock are entitled to vote on the
matters described in this proxy
statement);
|
|
•
|
|
if
our board of directors determines to engage in a self-tender
offer:
|
|
•
|
|
the
actual amount of such self-tender offer may be lower or higher than the
amount described above depending on the amount of our liabilities
following the sale of Theatre Direct and other
factors;
|
|
•
|
|
the
offer period for a self-tender offer may vary depending on a number of
factors, including any contingent liabilities or other unforeseen matters;
and
|
|
•
|
|
we
will announce the offer period and the per-share purchase price on or
prior to the commencement date of such self-tender
offer.
|
|
•
|
|
the
estimated consideration that would be paid to Hollywood Media in the
proposed transaction in comparison to the risks associated with
maintaining the operations of our Broadway Ticketing Division which
include those risk factors discussed in our Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 2009, originally filed
with the Securities and Exchange Commission (the “SEC”) on March 19, 2010
and amended on April 30, 2010 . Specifically, our board of
directors believes that the sale of our Broadway Ticketing Division
presents a better alternative than maintaining it due to, among other
things, the risks relating to the fact that the Broadway Ticketing
business is geographically-concentrated in New York City (which exposes
the business to the risk of being shut down in the event of catastrophic
events occurring in New York City), the increased competition in the
market of online tickets sales, and the potential for union strikes at
Broadway Theaters which could significantly disrupt the
business;
|
|
•
|
|
the
potential uses for the consideration that would be paid to Hollywood Media
in the proposed transaction, including the ability to pay a one-time
special dividend to our shareholders or engage in a self-tender offer to
purchase shares of our common stock (although we are not required to pay a
one-time special cash dividend or engage in a self-tender offer, see
“SUMMARY TERM
SHEET— Use of
Proceeds from the Sale of Theatre Direct beginning on page
6);
|
|
•
|
|
the
extensive sale process conducted by Hollywood Media and Hollywood Media’s
financial advisor, Peter J. Solomon Company, with respect to the sale of
Theatre Direct;
|
|
•
|
|
the
price proposed by Key Brand represented the highest definitive offer that
Hollywood Media received for the acquisition of Theatre
Direct;
|
|
•
|
|
the
economies of scale and synergies that Key Brand expects to benefit from
following the acquisition of Theatre Direct allowed Key Brand to offer
Hollywood Media consideration that was greater than the value that
Hollywood Media’s board of directors expected to receive from continuing
to own Theatre Direct;
|
|
•
|
|
the
opinion of Peter J. Solomon Company that, as of the date of the opinion
and based upon and subject to the factors and assumptions set forth in
such opinion, the aggregate consideration to be received by Hollywood
Media for all of the outstanding shares of Theatre Direct common stock
pursuant to the Stock Purchase Agreement was fair from a financial point
of view to Hollywood Media;
|
|
•
|
|
that
shareholders of Hollywood Media would continue to own stock in Hollywood
Media and participate in future earnings and potential growth of Hollywood
Media’s Ad Sales Division, Intellectual Properties Division and other
remaining businesses, including Hollywood Media’s minority equity interest
in MovieTickets.com, Inc., Hollywood Media’s right to earnout payments
from the sale of its former subsidiary, Hollywood Media’s right to
exercise or put the Warrant issued pursuant to the Stock Purchase
Agreement, and Hollywood Media’s right to payments under the Promissory
Note and the earnout in connection with the sale of Theatre Direct
pursuant to the Stock Purchase Agreement;
and
|
|
•
|
|
the
terms of the Stock Purchase Agreement,
including:
|
|
•
|
|
the
$20 million in cash to be paid by Key Brand (subject to a working capital
adjustment) and Hollywood Media being released from $1.6 million of
liabilities associated with employment agreements with certain employees
of Theatre Direct, which provides certainty in
value;
|
|
•
|
|
our
ability to terminate the Stock Purchase Agreement in order to accept a
superior proposal, subject to paying a termination fee of $1.2
million;
|
|
•
|
|
the
view of our board of directors, after consulting with the Company’s legal
counsel and financial advisors, that the termination fee of $1.2 million
to be paid by Hollywood Media if the Stock Purchase Agreement is
terminated under certain circumstances was within the range reflected in
similar transactions and not likely to prevent Hollywood Media from
terminating the Stock Purchase Agreement or accepting superior offers to
purchase Theatre Direct;
|
|
•
|
|
our
ability, under certain circumstances, to furnish information to and
conduct negotiations with third parties regarding other unsolicited
acquisition proposals; and
|
|
•
|
|
the
ability of our board of directors, under certain circumstances, to change
its recommendation that our shareholders vote in favor of the Proposal to
Sell Theatre Direct.
|
|
•
|
|
For
a period of ninety days after the closing of the sale of Theatre Direct
pursuant to the Stock Purchase Agreement, the salaries under Mr.
Rubenstein’s and Ms. Silvers’ employment agreements will continue in place
on their current terms (rather than such salaries being paid at their
current rates through December 31, 2010 per their current employment
agreements).
|
|
•
|
|
After
this ninety-day period, Mr. Rubenstein and Ms. Silvers will no longer
receive fixed salaries from Hollywood Media (other than a nominal payment
of $1 per year), and will each instead receive compensation for his or her
services to Hollywood Media in amounts equal to five percent (5%) of the
sum of (i) any distributions and other proceeds Hollywood Media receives
after December 23, 2009 (the effective date of the amendments to the
current employment agreements) in respect of its ownership interest in
MovieTickets.com, Inc. and (ii) certain other amounts that may be received
by Hollywood Media from MovieTickets.com, Inc. (collectively, the “5%
Distribution”). In 2008 and 2009, Hollywood Media received
approximately $1.3 million and approximately $1.9 million, respectively,
in respect of its ownership interest in MovieTickets.com,
Inc. Accordingly, Mr. Rubenstein and Ms. Silvers would each
have received approximately $65,000 in 2008 and $95,000 in 2009 pursuant
to the 5% Distribution. Hollywood Media currently has no reason
to believe that the amount it will receive in future years in respect of
its ownership interest in MovieTickets.com, Inc. will be substantially
different than the amount Hollywood Media received in 2009 in respect of
its ownership interest in MovieTickets.com, Inc. Pursuant to
the 5% Distribution, upon a sale of Hollywood Media’s interest in
MovieTickets.com, Inc., Mr. Rubenstein and Ms. Silvers would each receive
5% of the proceeds received by Hollywood Media in such
sale.
|
|
•
|
|
Mr.
Rubenstein and Ms. Silvers have voluntarily agreed to defer $812,501 and
$332,189, respectively, in change of control payments that would otherwise
be owed by Hollywood Media to them pursuant to each of their employment
agreements upon the consummation of the sale of Theatre Direct pursuant to
the Stock Purchase Agreement.
|
|
•
|
|
Mr.
Rubenstein will receive:
|
|
•
|
|
4.76%
of all payments of principal and interest received by Hollywood Media on
account of the Promissory Note (for a maximum amount of $407,201), with
each such payment to be made to Mr. Rubenstein within five business days
of the date Hollywood Media receives payments of principal and interest on
account of the Promissory Note (provided that any such amounts that would
be payable during the first year following the consummation of the sale of
Theatre Direct pursuant to the Stock Purchase Agreement will be set aside
in a “rabbi trust”), and
|
|
•
|
|
5.79%
of the first $7 million of earnout payments received by Hollywood Media
pursuant to the Stock Purchase Agreement (for a maximum amount of
$405,300), with each such payment to be made to Mr. Rubenstein within five
business days of the date Hollywood Media receives the first $7 million of
earnout payments pursuant to the Stock Purchase Agreement (provided that
any such amounts that would be payable during the first year following the
consummation of the sale of Theatre Direct pursuant to the Stock Purchase
Agreement will be set aside in a “rabbi
trust”).
|
|
•
|
|
Ms.
Silvers will receive:
|
|
•
|
|
1.94%
of all payments of principal and interest received by Hollywood Media on
account of the Promissory Note (for a maximum amount of $166,989), with
each such payment to be made to Ms. Silvers within five business days of
the date Hollywood Media receives payments of principal and interest on
account of the Promissory Note (provided that any such amounts that would
be payable during the first year following the consummation of the sale of
Theatre Direct pursuant to the Stock Purchase Agreement will be set aside
in a “rabbi trust”), and
|
|
•
|
|
2.36%
of the first $7 million of earnout payments received by Hollywood Media
pursuant to the Stock Purchase Agreement (for a maximum amount of
$165,200), with each such payment to be made to Ms. Silvers within five
business days of the date Hollywood Media receives the first $7 million of
earnout payments pursuant to the Stock Purchase Agreement (provided that
any such amounts that would be payable during the first year following the
consummation of the sale of Theatre Direct pursuant to the Stock Purchase
Agreement will be set aside in a “rabbi
trust”).
|
|
•
|
|
“FOR” the Proposal to
Sell Theatre Direct; and
|
|
•
|
|
“FOR” the Proposal to
Adjourn or Postpone the Special Meeting, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes at the time of
the special meeting to approve the Proposal to Sell Theatre
Direct.
|
|
•
|
|
the
approval of the shareholders of Hollywood
Media;
|
|
•
|
|
the
absence of legal restraints from a governmental
authority;
|
|
•
|
|
each
party’s respective representations and warranties in the Stock Purchase
Agreement being true and correct as of the closing date to the standards
described in the Stock Purchase Agreement (subject to certain exceptions);
and
|
|
•
|
|
each
party’s performance in all material respects of its obligations required
to be performed under the Stock Purchase Agreement on or prior to the
closing date.
|
|
•
|
|
Key
Brand receiving a written consent from the requisite lenders under the
Credit Agreement for Key Brand to consummate the transactions contemplated
by the Stock Purchase Agreement and Key Brand being entitled to borrow up
to $15 million under the Credit Agreement towards the payment of the cash
consideration contemplated by the Stock Purchase Agreement, although, Key
Brand informed Hollywood Media that if the lenders under the Credit
Agreement consent to Key Brand using its cash on hand to complete the
transactions contemplated by the Stock Purchase Agreement, then Key Brand
will waive the closing condition of Key Brand being entitled to borrow up
to $15 million under the Credit Agreement towards the payment of the cash
consideration contemplated by the Stock Purchase Agreement;
and
|
|
•
|
|
the
absence of a Material Adverse Effect (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase
Agreement—Representations and Warranties—Definition of Knowledge and
Material Adverse Effect” beginning on page 76) on Theatre Direct
and its subsidiaries as of the closing
date.
|
|
•
|
|
by
mutual written consent of Hollywood Media and Key
Brand;
|
|
•
|
|
by
either Hollywood Media or Key Brand
if:
|
|
•
|
|
subject
to certain exceptions and conditions set forth in the Stock Purchase
Agreement, the closing of the Stock Purchase Agreement shall not have
occurred by August 29, 2010 (which we refer to as, the “Termination Date”)
(Hollywood Media may not terminate the Stock Purchase Agreement under this
provision until the special meeting of shareholders to vote on the
approval of the sale of Theatre Direct has occurred. The
Termination Date has not been extended beyond August 29, 2010, however as
of the date this proxy statement is being mailed to shareholders, the
Stock Purchase Agreement has not been
terminated.);
|
|
•
|
|
there
is in effect a final nonappealable order of a governmental entity
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by the Stock Purchase Agreement (with certain
exceptions set forth in the Stock Purchase Agreement);
or
|
|
•
|
|
the
shareholders of Hollywood Media do not approve the sale of Theatre Direct
by the requisite vote at the special meeting of shareholders or at any
adjournment or postponement
thereof;
|
|
•
|
|
by
Hollywood Media if:
|
|
•
|
|
it
concurrently enters into a definitive acquisition agreement providing for
a superior proposal (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase
Agreement—Covenants—Restrictions on Solicitation of Other Offers”
beginning on page 81) (provided that Hollywood Media satisfied the
conditions set forth in the Stock Purchase Agreement, including paying Key
Brand a termination fee of $1.2
million);
|
|
•
|
|
Key
Brand materially breaches or fails to perform any of its representations,
warranties, covenants or agreements in the Stock Purchase Agreement
(subject to certain conditions set forth in the Stock Purchase Agreement);
or
|
|
•
|
|
certain
conditions relating to Key Brand receiving a written consent from the
requisite lenders under the Credit Agreement and Key Brand being entitled
to borrow up to $15 million under the Credit Agreement are not satisfied
(subject to certain conditions set forth in the Stock Purchase
Agreement);
|
|
•
|
|
by
Key Brand if:
|
|
•
|
|
the
board of directors of Hollywood Media withdraws or modifies its
recommendation that the Hollywood Media shareholders approve the sale of
Theatre Direct as contemplated by the Stock Purchase Agreement or the
board of directors of Hollywood Media publicly approves, endorses, or
recommends to the shareholders of Hollywood Media any other acquisition
proposal (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase
Agreement—Covenants—Restrictions on Solicitation of Other Offers”
beginning on page 81);
|
|
•
|
|
Hollywood
Media materially breaches or fails to perform any of its representations,
warranties, covenants or agreements in the Stock Purchase Agreement
(subject to certain conditions set forth in the Stock Purchase Agreement);
or
|
|
•
|
|
a
Material Adverse Effect occurs which cannot be cured by Hollywood Media by
August 29, 2010 (with certain exceptions set forth
in
|
|
•
|
|
our
Ad Sales Division;
|
|
•
|
|
our
Intellectual Properties Division;
|
|
•
|
|
our
26.2% equity interest in MovieTickets.com,
Inc.;
|
|
•
|
|
an
earnout from the sale of the Hollywood.com
business;
|
|
•
|
|
the
right to exercise or put the Warrant issued pursuant to the Stock Purchase
Agreement; and
|
|
•
|
|
the
right to receive payments under the Promissory Note and earnout in
connection with the sale of Theatre Direct pursuant to the Stock Purchase
Agreement.
|
|
•
|
|
stockholders’
equity of at least $10 million;
|
|
•
|
|
at
least 750,000 publicly held shares (total shares outstanding, less any
shares held directly or indirectly by officers, directors or any person
who is the beneficial owner of more than 10% of the total shares
outstanding of the company);
|
|
•
|
|
market
value of publicly held shares of at least $5 million;
and
|
|
•
|
|
at
least two registered and active market
makers.
|
|
•
|
|
Hollywood
Media will execute a release in favor of Theatre
Direct;
|
|
•
|
|
Key
Brand and Hollywood Media will enter into a transition services agreement
providing for the provision of certain services by Hollywood Media to
Theatre Direct;
|
|
•
|
|
Hollywood
Media, Key Brand and The Bank of New York Mellon entered into the Escrow
Agreement (see “SUMMARY
TERM SHEET—The Escrow Agreement and Deposit and Expense Reimbursement
beginning on page 5); and
|
|
•
|
|
Mitchell
Rubenstein, the Chairman and Chief Executive Officer of Hollywood Media,
and Laurie S. Silvers, the Vice-Chairman, President and Secretary of
Hollywood Media, will each execute non-competition agreements with Key
Brand.
|
|
•
|
|
an
aggregate amount of $4.14 million in total change of control payments to
Mitchell Rubenstein, the Chairman and Chief Executive Officer of Hollywood
Media, and Laurie S. Silvers, the Vice-Chairman, President and Secretary
of Hollywood Media, an aggregate amount of $3.0 million of which will be
paid upon the consummation of the sale of Theatre Direct pursuant to the
Stock Purchase Agreement and approximately $1.14 million of which will be
paid (if Mr. Rubenstein and Ms. Silvers continue to be employed by
Hollywood Media on the first anniversary following the consummation of the
sale of Theatre Direct pursuant to the Stock Purchase Agreement (or if
such employment is terminated on or before such date by Hollywood Media
without “cause” or by Mr. Rubenstein or Ms. Silvers for “good reason”))
pursuant to the employment agreements of Mr. Rubenstein and Ms. Silvers as
Hollywood Media receives payments under the Promissory Note and the
earnout pursuant to the Stock Purchase Agreement (provided that any such
amounts that would be payable during the first year following the
consummation of the sale of Theatre Direct pursuant to the Stock Purchase
Agreement will be set aside in a “rabbi trust”) (see “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Interests of Certain Persons in the Sale of Theatre
Direct—Amendments to Employment Agreements of Mr. Rubenstein and Ms.
Silvers” beginning on page
64);
|
|
•
|
|
an
aggregate amount of $400,000 in change of control payments to two
executives in Hollywood Media’s legal department, each of whom will
receive these payments in accordance with their retention agreements, with
such amounts payable at closing (provided that Hollywood Media may defer
one-half of these payments by up to one year if it elects to require the
continued employment of one or both of these executives during a
transition period of up to one
year);
|
|
•
|
|
$350,000
in fees, plus additional out−of−pocket expenses, to Peter J. Solomon
Company for providing financial advisory services and the fairness opinion
to Hollywood Media’s board of directors in connection with evaluating and
approving the Stock Purchase Agreement and the transactions contemplated
thereby;
|
|
•
|
|
$1
million in legal fees, plus additional out−of−pocket expenses, in
connection with preparing and negotiating the Stock Purchase Agreement and
the related documents and preparing and filing this proxy statement
relating to the transactions contemplated by the Stock Purchase Agreement;
and
|
|
•
|
|
$15,000
in fees ($7,500 of which has been paid as an initial retainer), plus
additional out−of−pocket expenses, to a proxy solicitation firm, Innisfree
M&A Incorporated, to assist in the distribution and solicitation of
proxies for the special meeting.
|
|
•
|
|
to
approve the Proposal to Sell Theatre Direct;
and
|
|
•
|
|
to
approve the Proposal to Adjourn or Postpone the Special Meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
Proposal to Sell Theatre Direct.
|
•
|
changes
in global or domestic economic
conditions;
|
|
•
|
the
ability of Hollywood Media and Theatre Direct to compete with other online
ticketing services and other
competitors;
|
|
•
|
the
unpredictability of future revenues, expenses and cash flows of Hollywood
Media and Theatre Direct;
|
|
•
|
the
unpredictability of the stock price of Hollywood
Media;
|
|
•
|
the
timing and amount of any special cash dividend or self-tender
offer;
|
|
•
|
the
ability of Hollywood Media and Theatre Direct to protect their
intellectual property;
|
|
•
|
the
enactment of ticketing regulations limiting the price at which tickets may
be re-sold or otherwise adversely affecting the business of Theatre Direct
or Hollywood Media;
|
|
•
|
the
occurrence of any event, change or other circumstance that could give rise
to the termination of the Stock Purchase
Agreement;
|
|
•
|
the
inability to complete the transactions contemplated by the Stock Purchase
Agreement due to the failure to satisfy the conditions to the completion
of the transactions contemplated by the Stock Purchase Agreement,
including Key Brand not obtaining written consent from the requisite
lenders under the Credit Agreement for Key Brand to consummate the
transactions contemplated by the Stock Purchase Agreement or Key Brand not
having sufficient cash on hand at closing or, if needed to complete
the transaction, Key Brand not obtaining financing consistent with the
terms of the Stock Purchase
Agreement;
|
|
•
|
the
failure of the transactions contemplated by the Stock Purchase Agreement
to close for any other reason;
|
•
|
the
ability of Hollywood Media, Theatre Direct and/or Key Brand to meet
expectations regarding the timing for completion of the transactions
contemplated by the Stock Purchase
Agreement;
|
|
•
|
the
retention of certain key employees at Hollywood Media and Theatre Direct
as a result of the transactions contemplated by the Stock Purchase
Agreement;
|
|
•
|
business
uncertainty and contractual restrictions during the pendency of the
transactions contemplated by the Stock Purchase
Agreement;
|
|
•
|
the
possibility of not receiving payments pursuant to the Promissory Note and
the potential earnout under the Stock Purchase
Agreement;
|
|
•
|
the
timing and amount of the payments received by Hollywood Media pursuant to
the Promissory Note and the potential earnout under the Stock Purchase
Agreement;
|
|
•
|
the
ability of Hollywood Media to exercise or put the
Warrant;
|
|
•
|
the
possibility of our common stock being delisted from The NASDAQ Global
Market and not qualifying for trading on another exchange or market (such
as The NASDAQ Capital Market, the American Stock Exchange or the
over-the-counter market);
|
|
•
|
the
possible effect of the announcement of the Stock Purchase Agreement and
the transactions contemplated thereby on our customer and supplier
relationships, operating results, and business
generally;
|
•
|
the
outcome of any legal proceedings that may be instituted against Hollywood
Media and others related to the Stock Purchase Agreement or the
transactions contemplated thereby or as a result
thereof.
|
|
•
|
stockholders’
equity of at least $10 million;
|
|
•
|
at
least 750,000 publicly held shares (total shares outstanding, less any
shares held directly or indirectly by officers, directors or any person
who is the beneficial owner of more than 10% of the total shares
outstanding of the company);
|
|
•
|
market
value of publicly held shares of at least $5 million;
and
|
•
|
at
least two registered and active market
makers.
|
|
•
|
Annex H
– Information About Key Brand Entertainment
Inc.
|
|
•
|
Annex I
– Key Brand Entertainment Inc.- Management Discussion and
Analysis of Results of Operations and Financial
Condition
|
|
•
|
Annex J
– Pro Forma Condensed Consolidated Financial Statements of Key
Brand Entertainment Inc.
|
|
•
|
Annex K
– Selected Financial Data of Key Brand Entertainment
Inc.
|
|
•
|
Annex L
– Audited Consolidated Financial Statements of Key Brand
Entertainment Inc. and Subsidiaries for the periods ended December 31,
2009 and December 31, 2008
|
|
•
|
Annex M
– Unaudited Consolidated Financial Statements of Key Brand
Entertainment Inc. and Subsidiaries for the period ended June 30,
2010
|
|
•
|
Key
Brand’s indication of interest contained more favorable overall terms,
including the amount and form of
consideration;
|
|
•
|
Key
Brand was a better strategic fit for Theatre Direct because of Key Brand’s
existing Broadway Across America theatre business and Key Brand’s Japanese
ticketing shareholder;
|
|
•
|
Hollywood
Media was more likely to receive the earnout portion of the consideration
under Key Brand’s indication of interest because of Key Brand’s strategic
fit with Theatre Direct; and
|
|
•
|
Key
Brand’s indication of interest contained fewer conditions to closing and
therefore made it more likely that the proposed transaction would be
completed.
|
•
|
Key
Brand would pay to Hollywood Media $15.2 million cash (subject to a
working capital adjustment);
|
|
•
|
Key
Brand would issue to Hollywood Media a subordinated promissory note in the
initial principal amount of $6.5 million (the term and interest rate for
the subordinated promissory note were not specified);
and
|
|
•
|
Hollywood
Media would receive an earnout from Key Brand of up to $10 million, with
two $5 million tranches based on Theatre Direct and its subsidiaries
achieving certain revenue targets (the benchmarks and the time period for
the earnout were not specified).
|
|
•
|
Key
Brand would pay to Hollywood Media $20 million cash (subject to a working
capital adjustment) and Key Brand would assume $1.6 million of liabilities
associated with employment agreements with certain employees of Theatre
Direct (which essentially is a cash equivalent for Hollywood
Media);
|
|
•
|
Key
Brand would issue to Hollywood Media a 7 year subordinated promissory note
in the initial principal amount of $5 million at an interest rate of 15%
per annum;
|
|
•
|
Hollywood
Media would receive an earnout from Key Brand of up to $15 million, with
two $7.5 million tranches based on Theatre Direct and its subsidiaries
achieving certain revenue and EBITDA targets (with the first $7.5 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
greater than or equal to $125 million in any full fiscal year during the
seven-year period commencing on January 1 of the first full calendar year
following the closing or if Theatre Direct and its subsidiaries achieve
EBITDA greater than or equal to $14 million in the aggregate during the
period from the closing date until the end of the fiscal year in which the
third anniversary of the closing date occurs, and the second $7.5 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
equal to or greater than $150 million during any full fiscal year ending
during the seven-year period commencing on January 1 of the first full
calendar year following the closing);
and
|
|
•
|
Theatre
Direct would issue Hollywood Media a warrant to purchase 10% 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 (with
(i) Theatre Direct having the option to redeem the warrant from Hollywood
Media at any time after the first anniversary of the issue date of the
warrant for an amount equal to the greater of (x) 10% of the market value
of the shares of common stock of Theatre Direct issuable upon exercise of
the warrant and (y) $2 million, and (ii) Hollywood Media having the option
to put the warrant to Theatre Direct upon a change of control of Theatre
Direct for 10% of the market value of the shares of common stock of
Theatre Direct issuable upon exercise of the warrant or at any time after
the seventh anniversary of the issue date of the warrant for an amount
equal to the greater of (x) 10% of the fair market value of Theatre Direct
and (y) $2 million).
|
Consideration (in millions)
|
May 22, 2009
Term Sheet
|
July 16, 2009
Proposal
|
Variance
|
|||||||||
Closing
Cash
|
$ | 24.0 | $ | 20.0 | $ | (4.0 | ) | |||||
Key
Brand’s assumption of $1.6 million of liabilities associated with
employment agreements with certain employees of Theatre Direct (which
essentially is a cash equivalent for Hollywood Media)
|
$ | 0.0 | $ | 1.6 | $ | 1.6 | ||||||
Promissory
Note (1)
|
$ | 10.0 | $ | 5.0 | $ | (5.0 | ) | |||||
Earnout
(2)
|
$ | 10.0 | $ | 15.0 | $ | 5.0 | ||||||
Warrant
(3)
|
$ | 0.0 | $ | 4.0 | $ | 4.0 | ||||||
Total
|
$ | 44.0 | $ | 45.6 | $ | 1.6 |
Consideration (in millions)
|
July 7, 2009
Proposal
|
July 16, 2009
Proposal
|
Variance
|
|||||||||
Closing
Cash
|
$ | 15.2 | $ | 20.0 | $ | 4.8 | ||||||
Key
Brand’s assumption of $1.6 million of liabilities associated with
employment agreements with certain employees of Theatre Direct (which
essentially is a cash equivalent for Hollywood Media)
|
$ | 0.0 | $ | 1.6 | $ | 1.6 |
Warrant
(3)
|
$ | 0.0 | $ | 4.0 | $ | 4.0 | ||||||
Promissory
Note (4)
|
$ | 6.5 | $ | 5.0 | $ | (1.5 | ) | |||||
Earnout
(5)
|
$ | 10.0 | $ | 15.0 | $ | 5.0 | ||||||
Total
|
$ | 31.7 | $ | 45.6 | $ | 13.9 |
|
(1)
|
The
term of the subordinated promissory note issued by Key Brand to Hollywood
Media was increased by 2 years (from 5 years to 7 years) and the interest
rate on the subordinated promissory note had been increased to 15% per
annum (from 8.5% per annum for the first three years and 10% per annum
thereafter).
|
|
(2)
|
In
addition to the revenue targets that were included in the May 22, 2009
non-binding term sheet, the July 16, 2009 proposal provided that the first
tranche of the earnout would also be paid if Theatre Direct and its
subsidiaries achieve EBITDA greater than or equal to $14 million in the
aggregate during the period from the closing date until the end of the
fiscal year in which the third anniversary of the closing date
occurs.
|
|
(3)
|
Theatre
Direct would issue Hollywood Media a warrant to purchase 10% 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
(whereas the May 22, 2009 non-binding term sheet and the July 7, 2009
proposal had no warrant). The $4.0 million nominal value of the
warrant is based on 10% of the sum of the $20.0 million cash payment, the
$5 million promissory note and the $15 million earnout in Key Brand’s
proposal.
|
|
(4)
|
The
July 7, 2009 proposal did not specify the term or the interest rate on the
promissory note to be issued by Key Brand to Hollywood
Media.
|
|
(5)
|
The
July 7, 2009 proposal did not specify the benchmarks or time period for
the earnout.
|
•
|
increasing
the principal amount of the subordinated promissory note Key Brand would
issue Hollywood Media by $2.5 million (from $5 million to $7.5 million)
and decreasing the interest rate on the subordinated promissory note by 5%
per annum in the first two years of the term of the subordinated
promissory note (from 15% per annum to 10% per annum) while maintaining
the interest rate on the subordinated promissory note at 15% per annum for
the remaining term of the subordinated promissory
note;
|
•
|
decreasing
the amount of the potential earnout Hollywood Media would receive from Key
Brand by $2.5 million (from $15 million to $12.5 million);
and
|
•
|
shifting
a portion of the principal amount of the subordinated promissory note to
the amount of the potential earnout if adverse ticketing regulations are
enacted.
|
|
•
|
Key
Brand would pay Hollywood Media $20 million cash (subject to a working
capital adjustment) and up to a maximum amount of $1.6 million of
liabilities with respect to any payment associated with change of control
obligations under the employment agreements with certain employees of
Theatre Direct would be or remain the liabilities of Theatre Direct from
and after the closing date of the sale of Theatre Direct and Hollywood
Media would have no obligation with respect to such liabilities up to a
maximum of $1.6
|
|
million
(which essentially is a cash equivalent for Hollywood
Media);
|
|
•
|
Key
Brand would issue Hollywood Media a five-year subordinated promissory note
in the initial principal amount of $7.5 million at an interest rate of 12%
per annum, with the subordinated promissory note accelerating upon a
change of control of Key Brand or Theatre
Direct;
|
|
•
|
Hollywood
Media would receive an earnout from Key Brand of up to $15 million, with
two $7.5 million tranches based on Theatre Direct and its subsidiaries
achieving certain revenue and EBITDA targets (with the first $7.5 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
greater than or equal to $125 million in any full fiscal year during the
seven-year period commencing on January 1 of the first full calendar year
following the closing or if Theatre Direct and its subsidiaries achieve
EBITDA greater than or equal to $14 million in the aggregate during the
period from the closing date until the end of the fiscal year in which the
third anniversary of the closing date occurs, and the second $7.5 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
equal to or greater than $150 million during any full fiscal year ending
during the seven-year period commencing on January 1 of the first full
calendar year following the closing);
and
|
|
•
|
Theatre
Direct would issue Hollywood Media a warrant to purchase 5% of the
outstanding shares of common stock of Theatre Direct as of the closing
date on a fully diluted basis at an exercise price of $.01 per share (with
(i) Theatre Direct having the option to redeem the warrant from Hollywood
Media at any time after the first anniversary of the issue date of the
warrant for an amount equal to the greater of (x) 5% of the market value
of the shares of common stock of Theatre Direct issuable upon exercise of
the warrant and (y) $1 million, and (ii) Hollywood Media having the option
to put the warrant to Theatre Direct upon a change of control of Key Brand
or at any time after the seventh anniversary of the issue date of the
warrant for an amount equal to the greater of (x) 5% of the market value
of the shares of common stock of Theatre Direct issuable upon exercise of
the warrant and (y) $1 million).
|
•
|
the
cash portion of the proposal had been decreased by $2.4 million (from $24
million in cash to $20 million in cash plus the release of Hollywood Media
from $1.6 million of liabilities associated with employment agreements
with certain employees of Theatre Direct (the original non-binding term
sheet had no release from these
liabilities));
|
|
•
|
the
principal amount of the subordinated promissory note issued by Key Brand
to Hollywood Media had been reduced by $2.5 million (from $10 million to
$7.5 million) and the interest rate on the subordinated promissory note
had been increased to 12% per annum (from 8.5% per annum for the first
three years and 10% per annum
thereafter);
|
|
•
|
the
amount of the potential earnout Hollywood Media would receive from Key
Brand had been increased by $5 million (from $10 million to $15 million);
and
|
|
•
|
the
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 had been
added.
|
|
•
|
Key
Brand would pay Hollywood Media $20 million cash (subject to a working
capital adjustment) and up to a maximum amount of $1.6 million of
liabilities with respect to any payment associated with change of control
obligations under the employment agreements with certain employees of
Theatre Direct would be or remain the liabilities of Theatre Direct from
and after the closing date of the sale of Theatre Direct and Hollywood
Media would have no obligation with respect to such liabilities up to a
maximum of $1.6 million (which essentially is a cash equivalent for
Hollywood Media);
|
|
•
|
Key
Brand would issue Hollywood Media a five-year subordinated promissory note
in the initial principal amount of $8.5 million at an interest rate of 12%
per annum, with the subordinated promissory note accelerating upon a
change of control of Key Brand or Theatre
Direct;
|
|
•
|
Hollywood
Media would receive an earnout from Key Brand of up to $14 million, with
two $7 million tranches based on Theatre Direct and its subsidiaries
achieving certain revenue and EBITDA targets (with the first $7 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
greater than or equal to $125 million in any full fiscal year during the
seven-year period commencing on January 1 of the first full calendar year
following the closing or if Theatre Direct and its subsidiaries achieve
EBITDA greater than or equal to $14 million in the aggregate during the
period from the closing date until the end of the fiscal year in which the
third anniversary of the closing date occurs, and the second $7 million
tranche payable if Theatre Direct and its subsidiaries achieve revenues
equal to or greater than $150 million during any full fiscal year ending
during the seven-year period commencing on January 1 of the first full
calendar year following the
closing);
|
|
•
|
Theatre
Direct would issue Hollywood Media a warrant to purchase 5% of the
outstanding shares of common stock of Theatre Direct as of the closing
date on a fully diluted basis at an exercise price of $.01 per share (with
(i) Theatre Direct having the option to redeem the warrant from Hollywood
Media at any time after the first anniversary of the issue date of the
warrant for an amount equal to the greater of (x) 5% of the appraised
value of the shares of common stock of Theatre Direct issuable upon
exercise of the warrant and (y) $1 million, and (ii) Hollywood Media
having the option to put the warrant to Theatre Direct upon a change of
control of Key Brand or at any time after the seventh anniversary of the
issue date of the warrant for an amount equal to the greater of (x) 5% of
the appraised value of the shares of common stock of Theatre Direct
issuable upon exercise of the warrant and (y) $1 million);
and
|
|
•
|
Key
Brand would not pay Hollywood Media for the Hollywood Media CD that
secures the bonds that secure Theatre Direct’s ticketing
purchases.
|
|
•
|
the
protections that were built into the Stock Purchase Agreement to help
ensure that Hollywood Media receives the earnout, including the
restrictions on Key Brand competing with Theatre Direct during the earnout
period;
|
•
|
that
Key Brand would deposit $1.2 million of the purchase price with the Escrow
Agent upon the Stock Purchase Agreement being
signed;
|
•
|
that
Hollywood Media could receive up to $2.4 million if Key Brand failed to
close the sale of Theatre
Direct;
|
•
|
that
the termination fee of $1.2 million that Hollywood Media would pay to Key
Brand if the Stock Purchase Agreement was terminated under certain
circumstances would not prevent other potential buyers from making topping
offers;
|
•
|
the
limitations and caps on Key Brand’s right to seek indemnification from
Hollywood Media;
|
•
|
that
the Promissory Note to be issued by Key Brand to Hollywood Media would
accelerate upon a change of control of Key Brand or Theatre Direct and the
interest rate under the Promissory Note had been increased to 12% per
annum (from 8.5% per annum as originally offered by Key
Brand);
|
•
|
that
the earnout period under the Stock Purchase Agreement was extended to ten
years, which increased the likelihood that Hollywood Media would receive
the entire $14 million of the potential
earnout;
|
•
|
that
the $500,000 working capital target under the Stock Purchase Agreement was
reasonable;
|
•
|
the
value of the Warrant to be issued by Theatre Direct to Hollywood Media
pursuant to the Stock Purchase Agreement was worth at least $1 million
(due to the put/call floors Hollywood Media negotiated);
and
|
•
|
that
up to a maximum amount of $1.6 million of liabilities with respect to any
payment associated with change of control obligations under the employment
agreements with certain employees of Theatre Direct would be or remain the
liabilities of Theatre Direct from and after the closing date of the sale
of Theatre Direct and Hollywood Media would have no obligation with
respect to such liabilities up to a maximum of $1.6 million (which
essentially is a cash equivalent for Hollywood
Media).
|
|
•
|
for
a period of ninety days after the closing of the sale of Theatre Direct,
the salaries under Mr. Rubenstein’s and Ms. Silvers’ employment agreements
would continue in place on their current terms (rather than such salaries
being paid at their current rates through December 31, 2010 per their
current employment agreements);
|
|
•
|
after
this ninety-day period, the salaries of Mr. Rubenstein and Ms. Silvers
would each be reduced to $1 per year and they would receive a total of 10%
(5% each) of all distributions received by Hollywood Media on account of
its minority ownership interest in MovieTickets.com, Inc. in exchange for
Mr. Rubenstein and Ms. Silvers continuing to manage Hollywood Media and
Hollywood Media’s interest in MovieTickets.com, Inc.;
and
|
|
•
|
the
amount of the payments due upon a sale of Theatre Direct (which would
constitute a “change of control” under each of their employment
agreements) would be reduced from approximately $4.14 million in the
aggregate to $3 million in the aggregate with the balance of approximately
$1.14 million being deferred and paid as follows: (i) 50% of the balance
paid on a pro rata basis as Hollywood Media receives payments on account
of the promissory note that is part of the consideration in the proposed
sale of Theatre
|
|
•
|
for
a period of ninety days after the closing of the sale of Theatre Direct,
the salaries under Mr. Rubenstein’s and Ms. Silvers’ employment agreements
would continue in place on their current terms (rather than such salaries
being paid at their current rates through December 31, 2010 per their
current employment agreements);
|
|
•
|
after
this ninety-day period, the salaries of Mr. Rubenstein and Ms. Silvers
would each be reduced to $1 per year and they would receive a total of 10%
(5% each) of all distributions received by Hollywood Media on account of
its minority ownership interest in MovieTickets.com, Inc. in exchange for
Mr. Rubenstein and Ms. Silvers continuing to manage Hollywood Media and
Hollywood Media’s interest in MovieTickets.com, Inc.;
and
|
|
•
|
the
amount of the payments due upon a sale of Theatre Direct (which would
constitute a “change of control” under each of their employment
agreements) would be reduced from approximately $4.14 million in the
aggregate to $3 million in the aggregate with the balance of approximately
$1.14 million being deferred and paid if Mr. Rubenstein and Ms. Silvers
continue to be employed by Hollywood Media on the first anniversary
following the consummation of the sale of Theatre Direct pursuant to the
Stock Purchase Agreement (or if such employment is terminated on or before
such date by Hollywood Media without “cause” or by Mr. Rubenstein or Ms.
Silvers for “good reason”) as follows: (i) 50% of the balance paid on a
pro rata basis as Hollywood Media receives payments on account of the
promissory note that is part of the consideration in the proposed sale of
Theatre Direct; and (ii) 50% of the balance paid on a pro rata basis as
Hollywood Media receives payments on account of the first tranche of the
earnout that is part of the consideration in the proposed sale of Theatre
Direct.
|
|
•
|
the
estimated consideration that would be paid to Hollywood Media in the
proposed transaction in comparison to the risks associated with
maintaining the operations of our Broadway Ticketing Division which
include those risk factors discussed in our Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 2009, originally filed
with the SEC on March 19, 2010 and amended April 30,
2010. Specifically, our board of directors believes that the
sale of our Broadway Ticketing Division presents a better alternative than
maintaining it due to, among other things, the risks relating to the fact
that the Broadway Ticketing business is geographically-concentrated in New
York City (which exposes the business to the risk of being shut down in
the event of catastrophic events occurring in New York City), the
increased competition in the market of online tickets sales, and the
potential for union strikes at Broadway Theaters which could significantly
disrupt the business;
|
|
•
|
the
potential uses for the consideration that would be paid to Hollywood Media
in the proposed transaction, including the ability to pay a one-time
special dividend to our shareholders or engage in a self-tender offer to
purchase shares of our common stock (although we are not required to pay a
one-time special cash dividend or engage in a self-tender offer, see
“PROPOSAL #1: PROPOSAL
TO SELL THEATRE DIRECT—Use of Proceeds from the Sale of Theatre
Direct beginning on page
62);
|
|
•
|
the
extensive sale process conducted by Hollywood Media and Peter J. Solomon
Company with respect to the sale of Theatre Direct, which involved
discussions with multiple parties to determine their potential interest in
purchasing Theatre Direct and which did not lead to any proposals more
favorable to Hollywood Media and its shareholders than the proposal by Key
Brand;
|
|
•
|
the
price proposed by Key Brand represented the highest definitive offer that
Hollywood Media received for the acquisition of Theatre
Direct;
|
|
•
|
the
economies of scale and synergies that Key Brand expects to benefit from
following the acquisition of Theatre Direct allowed Key Brand to offer
Hollywood Media consideration that was greater than the value that
Hollywood Media’s board of directors expected to receive from continuing
to own Theatre Direct;
|
|
•
|
the
opinion of Peter J. Solomon Company that, as of the date of the opinion
and based upon and subject to the factors and assumptions set forth in
such opinion, the aggregate consideration to be received by Hollywood
Media for all of the outstanding shares of Theatre Direct common stock
pursuant to the Stock Purchase Agreement was fair from a financial point
of view to Hollywood Media;
|
|
•
|
shareholders
of Hollywood Media would continue to own stock in Hollywood Media and
participate in future earnings and potential growth of Hollywood Media’s
Ad Sales Division, Intellectual Properties Division and other remaining
businesses, including Hollywood Media’s minority equity interest in
MovieTickets.com, Inc., Hollywood Media’s right to earnout payments from
the sale of its former subsidiary, Hollywood Media’s right to exercise or
put the Warrant issued pursuant to the Stock Purchase Agreement, and
Hollywood Media’s right to payments under the Promissory Note and the
earnout in connection with the sale of Theatre Direct pursuant to the
Stock Purchase Agreement; and
|
•
|
the
terms of the Stock Purchase Agreement,
including:
|
|
•
|
the
$20 million in cash to be paid by Key Brand (subject to a working capital
adjustment) and Hollywood Media being released from $1.6 million of
liabilities associated with employment agreements with certain employees
of Theatre Direct, which provides certainty in
value;
|
|
•
|
our
ability to terminate the Stock Purchase Agreement in order to accept a
superior proposal, subject to paying a termination fee of $1.2
million;
|
|
•
|
the
view of our board of directors, after consulting with the Company’s legal
counsel and financial advisors, that the termination fee of $1.2 million
to be paid by Hollywood Media if the
Stock
|
|
Purchase
Agreement is terminated under certain circumstances was within the range
reflected in similar transactions and not likely to prevent Hollywood
Media from terminating the Stock Purchase Agreement or accepting superior
offers to purchase Theatre Direct;
|
•
|
our ability, under certain circumstances, to
furnish information to and conduct negotiations with third parties
regarding other unsolicited acquisition proposals;
and
|
•
|
the ability of our board of directors, under
certain circumstances, to change its recommendation that our shareholders
vote in favor of the Proposal to Sell Theatre
Direct.
|
•
|
the
risk that not all of the conditions to the parties’ obligations to
complete the proposed sale of Theatre Direct will be satisfied or waived
in a timely manner or at all, and, as a result, it is possible that the
proposed sale of Theatre Direct may not be completed even if approved by
our shareholders;
|
•
|
the
requirement that we pay Key Brand a termination fee of $1.2 million if the
Stock Purchase Agreement is terminated under certain
circumstances;
|
•
|
the
restrictions on the conduct of our business prior to the completion of the
sale of Theatre Direct, requiring us to conduct the Theatre Direct
business only in the ordinary course, subject to specific limitations and
exceptions, which may delay or prevent us from undertaking business
opportunities that may arise pending the completion of the sale of Theatre
Direct;
|
•
|
the
risk of disruption to Hollywood Media’s Ad Sales Division, Intellectual
Properties Division, and our other businesses and interests as a result of
the proposed sale of Theatre Direct and market reaction to the proposed
sale of Theatre Direct;
|
•
|
the
risk that we may not receive the payments due under the Promissory Note
issued by Key Brand to Hollywood Media in connection with the sale of
Theatre Direct;
|
•
|
the
risk that the payments we receive under the Promissory Note issued by Key
Brand to Hollywood Media in connection with the sale of Theatre Direct may
be reduced if certain adverse ticketing regulations are
enacted;
|
•
|
the
risk that we will not receive the earnout payments if Theatre Direct and
its subsidiaries do not attain certain revenue performance levels;
and
|
•
|
the
other risks set forth in the “RISK
FACTORS” section of this proxy statement beginning on page
28.
|
•
|
reviewed
certain publicly available financial statements and/or other information
of Hollywood Media, Theatre Direct and Key
Brand;
|
•
|
reviewed
certain internal financial statements and other financial and operating
data concerning Hollywood Media, Theatre Direct and Key Brand prepared by
the management of Hollywood Media, Theatre Direct and Key Brand,
respectively;
|
•
|
reviewed
certain financial projections for Theatre Direct and Key Brand prepared by
the management of Theatre Direct and Key Brand,
respectively;
|
•
|
discussed
the past and current operations, financial condition and prospects of
Hollywood Media, Theatre Direct and Key Brand with management of Hollywood
Media, Theatre Direct and Key Brand,
respectively;
|
•
|
compared
the financial performance and condition of Theatre Direct with that of
certain other comparable publicly traded
companies;
|
•
|
reviewed
publicly available information regarding the financial terms of certain
transactions Peter J.
|
•
|
participated
in certain discussions among representatives of each of Hollywood Media,
Theatre Direct and Key Brand;
|
•
|
reviewed
the Stock Purchase Agreement, substantially in the form of the draft dated
December 12, 2009;
|
•
|
reviewed
the terms of the Promissory Note, the form of the Warrant, the form of
selling stockholder release to be delivered by Hollywood Media to Key
Brand pursuant to the Stock Purchase Agreement, the form of transition
services agreement to be entered into by Hollywood Media and Theatre
Direct pursuant to the Stock Purchase Agreement, and the form of
non-competition agreements to be entered into by Key Brand and each of
Mitchell Rubenstein, Hollywood Media’s Chairman and Chief Executive
Officer, and Laurie S. Silvers, Hollywood Media’s Vice-Chairman, President
and Secretary, pursuant to the Stock Purchase Agreement, each
substantially in the form of the drafts dated December 12, 2009 (the
“Ancillary Agreements”), and certain related documents;
and
|
•
|
performed
such other analyses as it deemed
appropriate.
|
Year
Ended December 31, (dollars in millions)
|
2009P | 2010P | 2011P | 2012P | 2013P | |||||||||||
Gross
Sales (1)
|
98.9 | 105.2 | 111.2 | 116.1 | 121.3 | |||||||||||
Adjusted
EBITDA (2)
|
6.2 | 7.6 | 8.6 | 9.2 | 9.8 | |||||||||||
Proforma
Standalone EBITDA (3)
|
5.7 | 7.1 | 8.1 | 8.7 | 9.2 | |||||||||||
Capital
Expenditures
|
1.2 | 1.2 | 1.2 | 1.2 | 1.2 |
•
|
consumer
ticket sales growth of 9% in 2009 and leveling off to between 5% and 6%
per year in 2010 through 2013;
|
•
|
groups
ticket sales growth of 1% in 2009 and leveling off to between 3% and 5%
per year in 2010 through 2013;
|
•
|
average
ticket price and service fees as a percentage of ticket price remaining
relatively flat; and
|
•
|
operating
expenses decreasing 19% in 2009 and leveling off to between 1% and 3%
growth in 2010 through 2013.
|
Present Value of Consideration
|
||||||||||||
Consideration
|
Nominal Amount
|
Low Estimate
|
High Estimate
|
|||||||||
Cash
Consideration (paid by Key Brand to Hollywood Media at
closing)
|
$ | 20.0 | $ | 20.0 | $ | 20.0 | ||||||
Working
Capital Adjustment
|
$ | 1.9 | $ | 1.9 | $ | 1.9 | ||||||
Release
at closing from liabilities associated with employment agreements with
certain employees of Theatre Direct
|
$ | 1.6 | $ | 1.6 | $ | 1.6 | ||||||
Promissory
Note (issued by Key Brand to Hollywood Media at closing)
|
$ | 13.6 | $ | 7.1 | $ | 8.7 | ||||||
Warrant
(issued by Theatre Direct to Hollywood Media at closing)
|
$1.0
(minimum)
|
$ | 0.4 | $ | 1.8 | |||||||
Earnout
(paid by Key Brand to Hollywood Media pursuant to the Stock Purchase
Agreement)
|
$ | 14.0 | $ | 3.8 | $ | 7.3 | ||||||
Total
Consideration
|
$ | 52.1 | $ | 34.8 | $ | 41.2 |
|
(i)
|
Promissory
Note and interest earned: Peter J. Solomon Company assumed the Promissory
Note would be held until maturity, Hollywood Media would receive interest
thereon at a rate of 12% per annum, paid quarterly in cash, and applied
discount rates between 12%-18% to determine the present value
thereof. Discount rates of 12% to 18% were derived taking into
consideration, among other things, the then current credit market indices
yields.
|
|
(ii)
|
Warrant:
Peter J. Solomon Company considered the present value of (i) the minimum
value of the Warrant pursuant to its terms, assuming exercise of the put
option by Hollywood Media on the seventh anniversary of the issue date and
(ii) an assumed maximum value of the Warrant equal to 5% of a potential
future implied enterprise value of Theatre Direct calculated based on
projections of Pro Forma Standalone EBITDA and excess cash accumulation
provided by the management of Hollywood Media. In the case of
each of (i) and (ii), Peter J. Solomon Company applied discount rates
between 10% to 14% to calculate the range of present values of the
Warrant. The discount rates were derived taking into
consideration, among other things, a weighted average cost of capital
calculation. The potential future implied enterprise value used to
determine the assumed maximum value of the Warrant was derived applying a
range of multiples of 4.0x to 4.5x to the projected Pro Forma Standalone
EBITDA of Theatre Direct provided to Peter J. Solomon Company by Hollywood
Media’s management. Multiples were derived taking into consideration the
selected publicly-traded companies described under “Analysis of Selected
Publicly Traded Comparable
Companies.”
|
|
(iii)
|
Earnout
Payments: In its analysis of the value of the Earnout Payments,
Peter J. Solomon Company reviewed both historical and future revenue
growth rates for Theatre Direct. Future revenue growth rates
were based on the revenue Theatre Direct is expected to receive during
fiscal years 2009 through 2013 ("Projection Period") based on projections
prepared by Hollywood Media management and furnished to, and used by,
Peter J. Solomon Company for purposes of its analysis. Theatre
Direct revenue was projected to grow at an annual rate of 5.2% during the
Projection Period. To determine when the Earnout Payments could
be received, Peter J. Solomon Company’s illustrative analysis considered
that either (a) Theatre Direct's revenue would continue to grow at the
annualized growth rate per the financial projections provided by Hollywood
Media management and, as implied by such growth rate, would
achieve one Earnout Payment in year five and one Earnout Payment in year
nine (high estimate of the present value of the Earnout Consideration) or
(b) Theatre Direct revenue growth would slow and the Earnout Payments
would be received in the final year of the Earnout Period (low estimate of
the present value of the Earnout Consideration). Peter J.
Solomon Company applied discount rates between 10%-14% to the Earnout
Payments based on the illustrative analysis whereby the Earnout Payment
milestones were achieved in various years during the Earnout Period to
determine a range of present values of the Earnout
Payments. The applied discount rates of 10% to 14% were derived
taking into consideration, among other things, a weighted average cost of
capital calculation.
|
Enterprise Value as a Ratio
of:
|
Implied Trading
Multiples
|
|
LTM
EBITDA
|
4.1x
|
|
FY
2009E EBITDA
|
4.1x
|
Enterprise Value as a Ratio
of:
|
Implied Multiple
|
|
LTM
EBITDA
|
3.8x
|
•
|
stockholders’
equity of at least $10 million;
|
•
|
at
least 750,000 publicly held shares (total shares outstanding, less any
shares held directly or indirectly by officers, directors or any person
who is the beneficial owner of more than 10% of the total shares
outstanding of the company);
|
•
|
market
value of publicly held shares of at least $5 million;
and
|
•
|
at
least two registered and active market
makers.
|
•
|
Mr.
Rubenstein will receive:
|
•
|
4.76%
of all payments of principal and interest received by Hollywood Media on
account of the Promissory Note (for a maximum amount of $407,201), with
each such payment to be made to Mr. Rubenstein within five business days
of the date Hollywood Media receives payments of principal and interest on
account of the Promissory Note (provided that any such amounts that would
be payable during the first year following the consummation of the sale of
Theatre Direct pursuant to the Stock Purchase Agreement will be set aside
in a “rabbi trust”), and
|
•
|
5.79%
of the first $7 million of earnout payments received by Hollywood Media
pursuant to the Stock Purchase Agreement (for a maximum amount of
$405,300), with each such payment to be made to Mr. Rubenstein within five
business days of the date Hollywood Media receives the first $7 million of
earnout payments pursuant to the Stock Purchase Agreement (provided that
any such amounts that would be payable during the first year following the
consummation of the sale of Theatre Direct pursuant to the Stock Purchase
Agreement will be set aside in a “rabbi
trust”).
|
•
|
Ms.
Silvers will receive:
|
•
|
1.94%
of all payments of principal and interest received by Hollywood Media on
account of the Promissory Note (for a maximum amount of $166,989), with
each such payment to be made to Ms. Silvers within five business days of
the date Hollywood Media receives payments of principal and interest on
account of the Promissory Note (provided that any such amounts that would
be payable during the first year following the consummation of the sale of
Theatre Direct pursuant to the Stock Purchase Agreement will be set aside
in a “rabbi trust”), and
|
•
|
2.36%
of the first $7 million of earnout payments received by Hollywood Media
pursuant to the Stock Purchase Agreement (for a maximum amount of
$165,200), with each such payment to be made to Ms. Silvers within five
business days of the date Hollywood Media receives the first $7 million of
earnout payments pursuant to the Stock Purchase Agreement (provided that
any such amounts that would be payable during the first year following the
consummation of the sale of Theatre Direct pursuant to the Stock Purchase
Agreement will be set aside in a “rabbi
trust”).
|
|
•
|
an
aggregate amount of $4.14 million in total change of control payments to
Mitchell Rubenstein, the Chairman and Chief Executive Officer of Hollywood
Media, and Laurie S. Silvers, the Vice-Chairman, President and Secretary
of Hollywood Media, an aggregate amount of $3.0 million of which will be
paid upon the consummation of the sale of Theatre Direct pursuant to the
Stock Purchase Agreement and approximately $1.14 million of which will be
paid (if Mr. Rubenstein and Ms. Silvers continue to be employed by
Hollywood Media on the first anniversary following the consummation of the
sale of Theatre Direct pursuant to the Stock Purchase Agreement (or if
such employment is terminated on or before such date by Hollywood Media
without “cause” or by Mr. Rubenstein or Ms. Silvers for “good reason”))
pursuant to the Amended Agreements as Hollywood Media receives payments
under the Promissory Note and the earnout pursuant to the Stock Purchase
Agreement (provided that any such amounts that would be payable during the
first year following the consummation of the sale of Theatre Direct
pursuant to the Stock Purchase Agreement will be set aside in a “rabbi
trust”) (see “PROPOSAL
#1: PROPOSAL TO SELL THEATRE DIRECT—Interests of Certain Persons in the
Sale of Theatre Direct—Amendments to Employment Agreements of Mr.
Rubenstein and Ms. Silvers” beginning on page
64);
|
|
•
|
an
aggregate amount of $400,000 in change of control payments to two
executives in Hollywood Media’s legal department, each of whom will
receive these payments in accordance with their retention agreements, with
such amounts payable at closing (provided that Hollywood Media may defer
one-half of these payments by up to one year if it elects to require the
continued employment of one or both of these executives during a
transition period of up to one
year);
|
|
•
|
$350,000
in fees, plus additional out−of−pocket expenses, to Peter J. Solomon
Company for providing financial advisory services and the fairness opinion
to Hollywood Media’s board of directors in connection with evaluating and
approving the Stock Purchase Agreement and the transactions contemplated
thereby;
|
|
•
|
$1
million in legal fees, plus additional out−of−pocket expenses, in
connection with preparing and negotiating the Stock Purchase Agreement and
the related documents and preparing and filing this proxy statement
relating to the transactions contemplated by the Stock Purchase Agreement;
and
|
•
|
$15,000
in fees ($7,500 of which has been paid as an initial retainer), plus
additional out−of−pocket expenses, to a proxy solicitation firm, Innisfree
M&A Incorporated, to assist in the distribution and solicitation of
proxies for the special
meeting.
|
|
•
|
$20
million in cash (subject to working capital adjustments described in the
Stock Purchase Agreement) (see “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase Agreement—Purchase
Price—Purchase Price Adjustment” beginning on page
69);
|
|
•
|
a
five-year second lien secured Promissory Note issued by Key Brand in the
initial principal amount of $8.5 million at an interest rate of 12% per
annum;
|
|
•
|
a
Warrant to purchase 5% of the outstanding shares of common stock of
Theatre Direct on a fully diluted basis as of the closing date of the sale
of Theatre Direct at an exercise price of $.01 per
share;
|
|
•
|
earnout
payments of up to $14 million contingent upon Theatre Direct and its
subsidiaries achieving certain revenue targets during the Earnout Period;
and
|
•
|
up
to a maximum amount of $1.6 million of liabilities with respect to any
payment associated with change of control obligations under the employment
agreements with certain employees of Theatre Direct will be or remain the
liabilities of Theatre Direct from and after the closing date of the sale
of Theatre Direct.
|
|
•
|
after
the Termination Date (as defined in “PROPOSAL #1: PROPOSAL TO SELL
THEATRE DIRECT—Terms of the Stock Purchase
Agreement—Termination—Termination Rights” beginning on page 89) and
at the time of such termination (i) Key Brand has not received a written
consent from the requisite lenders under the debt facilities provided to
Key Brand pursuant to the Credit Agreement for Key Brand to consummate the
transactions contemplated by the Stock Purchase Agreement and Key Brand is
not entitled to borrow up to $15 million under the Credit Agreement
towards the payment of the cash consideration pursuant to the Stock
Purchase Agreement, and (ii) there has not been any breach by Key Brand of
its obligations under the Stock Purchase Agreement relating to using its
commercially reasonable efforts to satisfy conditions pursuant to the
Credit Agreement which is capable of being cured and which has not been
cured; or
|
•
|
when
all of the conditions to closing (including the approval by the
shareholders of the Proposal to Sell Theatre Direct), other than the
condition relating to Key Brand receiving a written consent from the
requisite lenders under the Credit Agreement and Key Brand being entitled
to borrow up to $15 million under the Credit Agreement to pay the cash
consideration contemplated by the Stock Purchase Agreement, have been
satisfied or waived or are capable of being satisfied at closing, and the
condition relating to Key Brand receiving a written consent from the
requisite lenders under the Credit Agreement and Key Brand being entitled
to borrow up to $15 million under the Credit Agreement to pay the cash
consideration contemplated by the Stock Purchase Agreement is not
satisfied within thirty (30) days thereafter, and at the time of such
termination, there has not been any breach by Key Brand of its obligations
under the Stock Purchase Agreement relating to using its commercially
reasonable efforts to satisfy conditions pursuant to the Credit Agreement
which is capable of being cured and which has not been
cured.
|
|
•
|
organization,
valid existence, good standing, qualification and authorization to conduct
the business of Hollywood Media and Theatre
Direct;
|
|
•
|
availability
of the organizational documents of Theatre Direct and its
subsidiaries;
|
|
•
|
our
corporate power and authority to execute and deliver the Stock Purchase
Agreement;
|
|
•
|
absence
of violations of, defaults under or conflicts with the organizational
documents of Hollywood Media, Theatre Direct or Theatre Direct’s
subsidiaries, certain contracts or permits of Hollywood Media, Theatre
Direct or Theatre Direct’s subsidiaries, any order of a governmental body,
or applicable law as a result of consummating the transactions
contemplated by the Stock Purchase
Agreement;
|
|
•
|
consents
and approvals of governmental entities on the part of Hollywood Media,
Theatre Direct or Theatre Direct’s subsidiaries that are required in
connection with the execution and delivery of the Stock Purchase
Agreement;
|
|
•
|
capitalization
of Theatre Direct and its subsidiaries, the ownership of the stock of
Theatre Direct and the stock of Theatre Direct’s subsidiaries, the absence
of securities convertible into shares of Theatre Direct or convertible
into shares of Theatre Direct’s subsidiaries, and the absence of liens on
the assets of Theatre Direct and on the shares of common stock of Theatre
Direct;
|
|
•
|
Theatre
Direct’s financial statements and absence of undisclosed liabilities of
Theatre Direct or its subsidiaries;
|
|
•
|
absence
of certain changes since September 30,
2009;
|
|
•
|
tax
matters in respect of Theatre Direct and its
subsidiaries;
|
|
•
|
real
and personal property owned or leased by Theatre Direct and its
subsidiaries;
|
|
•
|
intellectual
property owned by Theatre Direct and its
subsidiaries;
|
|
•
|
material
contracts related to the business of Theatre Direct and its
subsidiaries;
|
|
•
|
labor
and employment matters in respect of Theatre Direct and its
subsidiaries;
|
|
•
|
litigation
or legal proceedings in respect of Theatre Direct and its
subsidiaries;
|
|
•
|
compliance
with laws and issuance of permits to Theatre Direct and its
subsidiaries;
|
|
•
|
environmental
matters in respect of Theatre Direct and its
subsidiaries;
|
|
•
|
brokers
or other advisors;
|
|
•
|
insurance
matters in respect of Theatre Direct and its
subsidiaries;
|
|
•
|
bank
accounts of Theatre Direct and its subsidiaries;
and
|
•
|
net
operating losses (for tax purposes) of Theatre
Direct.
|
•
|
its
organization, valid existence, good standing and qualification to conduct
business;
|
•
|
its
corporate power and authority and due authorization to enter into the
Stock Purchase Agreement and to consummate the transactions contemplated
by the Stock Purchase Agreement;
|
•
|
absence
of violations of, defaults under or conflicts with its organizational
documents, certain contracts or permits of Key Brand, any order of a
governmental entity, or applicable law as a result of consummating the
transactions contemplated by the Stock Purchase
Agreement;
|
•
|
consents
and approvals of governmental entities required in connection with the
execution and delivery of
|
|
•
|
litigation
or legal proceedings seeking to prohibit or restrain the transactions
contemplated by the Stock Purchase
Agreement;
|
|
•
|
investment
intention of Key Brand;
|
|
•
|
brokers
or other advisors;
|
|
•
|
financial
capability to fund the transactions contemplated by the Stock Purchase
Agreement;
|
|
that
Key Brand has not disclosed the existence, or terms and conditions of, the
transactions contemplated by the Stock Purchase Agreement to third
parties; and
|
•
|
that
Hollywood Media is not making any representations or warranties beyond
those expressly given by Hollywood Media pursuant to the Stock Purchase
Agreement.
|
|
•
|
declare,
set aside, make or pay any dividend or other distribution in respect of
the capital stock of Theatre Direct (other than cash dividends or other
distributions paid to Hollywood Media consistent with past practice) or
repurchase, redeem or otherwise acquire any outstanding shares of the
capital stock or other securities of, or other ownership interests in,
Theatre Direct or its subsidiaries;
|
|
•
|
transfer,
issue, sell or dispose of any shares of capital stock or other securities
of Theatre Direct or its subsidiaries or grant options, warrants, calls or
other rights to purchase or otherwise acquire shares of the capital stock
or other securities of Theatre Direct or its
subsidiaries;
|
|
•
|
effect
any recapitalization, reclassification or like change in the
capitalization of Theatre Direct or its
subsidiaries;
|
|
•
|
amend
the certificate of incorporation or by-laws or comparable organizational
documents of Theatre Direct or its
subsidiaries;
|
|
•
|
hire
employees whose annual compensation equals or exceeds $100,000 per year,
except for any hiring to replace the loss or departure of any existing
employees if made on substantially similar
terms;
|
|
•
|
enter
into any employee retention bonus plan which could have payments due after
the closing date;
|
|
•
|
enter
into any agreement with employees, or agree to make any payment to
employees, which would be triggered by the consummation of the
transactions contemplated by the Stock Purchase Agreement and would be
payable after the closing date;
|
•
|
other
than as required by law, a contract listed on a specific disclosure
schedule to the Stock Purchase Agreement or the terms of any benefit plan
sponsored by Hollywood Media, Theatre Direct or its subsidiaries (A)
increase the annual level of compensation payable or to become payable by
Theatre Direct or its subsidiaries to any of their respective directors or
employees by more than $5,000 per year, (B) grant any unusual or
extraordinary bonus, benefit or other direct or indirect compensation to
any director or executive officer of Theatre Direct or its subsidiaries
which is payable after the closing, (C) except as required by any existing
benefit plan sponsored by Theatre Direct or its subsidiaries, and other
than any incentive or bonus compensation paid prior to the closing,
increase the coverage or benefits available
under
|
|
•
|
subject
to any lien, any of the properties or assets (whether tangible or
intangible) of Theatre Direct or its subsidiaries, except for certain
permitted exceptions;
|
|
•
|
acquire
any material properties or assets or sell, assign, license, transfer,
convey, lease or otherwise dispose of any of the properties or assets of
Theatre Direct or its subsidiaries (except acquisitions or dispositions of
properties or assets which are not material to Theatre Direct or its
subsidiaries, (A) pursuant to an existing contract for fair consideration
or (B) in the ordinary course of business or (C) for the purpose of
disposing of obsolete or worthless assets); provided that this restriction
does not prohibit intercompany transfers of cash among Theatre Direct, its
subsidiaries, Hollywood Media and its subsidiaries in the ordinary course
of business consistent with past
practice;
|
|
•
|
other
than in the ordinary course of business, cancel or compromise any material
debt or claim or waive or release any material right of Theatre Direct or
its subsidiaries (the foregoing does not prohibit intercompany transfers
of cash among Theatre Direct, its subsidiaries, Hollywood Media and its
subsidiaries in the ordinary course of business consistent with past
practice, or the settlement of any intercompany accounts or debt prior to
closing);
|
|
•
|
within
75 days after the date of the Stock Purchase Agreement enter into any
commitment for capital expenditures of Theatre Direct and its subsidiaries
in excess of $50,000 for all commitments in the aggregate or after 75 days
after the date of the Stock Purchase Agreement enter into any commitment
for capital expenditures of Theatre Direct or its subsidiaries in excess
of $100,000 for all commitments in the aggregate (including commitments
entered into prior to such 75th
day); provided, however, that Theatre Direct and its subsidiaries may
enter into any commitment for capital expenditures without the consent of
Key Brand (i) in order to make emergency repairs, or (ii) to replace
equipment and assets in the ordinary course of
business;
|
|
•
|
enter
into, modify or terminate any labor or collective bargaining agreement of
Theatre Direct or its subsidiaries;
|
|
•
|
permit
Theatre Direct or its subsidiaries to enter into or agree to enter into
any merger or consolidation with any person or to adopt or agree to adopt
a plan of complete or partial liquidation, dissolution, restructuring or
other material reorganization of Theatre Direct or its
subsidiaries;
|
|
•
|
make
or rescind any election relating to taxes, settle or compromise any claim,
action, suit, litigation, proceeding, arbitration, investigation, audit
controversy relating to taxes, or except as required by applicable law or
GAAP, make any material change to any of its methods of accounting or
methods of reporting income or deductions for tax or accounting practice
or policy from those employed in the preparation of its most recent tax
return;
|
|
•
|
except
for the replacement or substitution of existing insurance policies with
similar or comparable policies, permit any insurance policy naming Theatre
Direct or its subsidiaries as a beneficiary or a loss payable payee to be
cancelled or terminated or, except as required by any existing benefit
plan sponsored by Theatre Direct or its subsidiaries, create an employee
insurance benefit plan or
arrangement;
|
|
•
|
within
75 days after the date of the Stock Purchase Agreement enter into any
contract relating to Theatre Direct or its subsidiaries’ purchase, lease
or maintenance of equipment, vehicles, inventory, materials, supplies,
machinery, equipment, parts or any other property or services which
involves expenditures of more than $50,000 annually, except for
expenditures made (i) in order to make emergency repairs, or (ii) to
replace equipment and assets in the ordinary course of
business;
|
•
|
after
75 days after the date of the Stock Purchase Agreement enter into any
contract relating to Theatre Direct or its subsidiaries’ purchase, lease
or maintenance of equipment, vehicles, inventory, materials, supplies,
machinery, equipment, parts or any other property or services which
involves expenditures of more than $100,000 annually except for
expenditures made (i) in order to make emergency repairs, or
(ii)
|
|
•
|
other
than in the ordinary course of business, (A) enter into any contract that
if existing on the date of the Stock Purchase Agreement would be a
“material contract” under the terms of the Stock Purchase Agreement (other
than contracts described in certain sections of the Stock Purchase
Agreement), (B) terminate, amend, supplement or modify in any respect any
material contract, (C) waive, release, cancel, allow to lapse, convey,
encumber or otherwise transfer any rights or claims under any material
contract, or (D) change incentive policies or payments under any material
contract existing on the date of the Stock Purchase Agreement or entered
into after the date of the Stock Purchase
Agreement;
|
|
•
|
incur
any indebtedness for borrowed money, enter into any guarantees of
indebtedness of other persons (other than Theatre Direct or its
subsidiaries) or make any loans, advances or capital contributions to, or
investments in, any other person;
|
|
•
|
enter
into any contract that obligates Theatre Direct or its subsidiaries not to
compete with any business;
|
|
•
|
enter
into any contract that is a joint venture or partnership contract or a
limited liability company operating agreement;
or
|
•
|
agree
to take any of the foregoing
actions.
|
|
•
|
|
solicit,
initiate, or take an action intended (or which may reasonably be expected)
to induce the making, submission or announcement of any acquisition
proposal;
|
|
•
|
|
engage
or participate in any discussions or negotiations with any person (other
than any officer, director, controlled affiliate or employee of Key Brand
or any of its affiliates or any investment banker, attorney or other
advisor or representative of Key Brand or any of its affiliates)
regarding, or furnish to any person any information with respect to, or
take any other action intended (or which may reasonably be expected) to
induce any inquiries or the making of, any proposal that constitutes or
may reasonably be expected to lead to, any acquisition proposal;
or
|
|
•
|
|
enter
into any letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any acquisition
proposal.
|
|
•
|
|
Hollywood
Media’s board of directors determines in good faith, (i) after
consultation with its financial advisors, that the offer constitutes or
could reasonably be expected to result in or lead to a superior proposal
(as defined below) and (ii) after consultation with its outside legal
counsel, that such action is advisable in order for the board of directors
of Hollywood Media to comply with its fiduciary obligations to the
shareholders of Hollywood Media under applicable
law;
|
|
•
|
|
concurrently
with furnishing any such information to, or entering into discussions or
negotiations with, such party, Hollywood Media gives Key Brand written
notice of the identity of such person or group and of Hollywood Media’s
intention to furnish information to, or enter into discussions or
negotiations with, such party;
|
|
•
|
|
Hollywood
Media enters into a confidentiality agreement with such person on the
terms provided in the Stock Purchase Agreement;
and
|
|
•
|
|
prior
to or contemporaneously with furnishing any such information to such
party, Hollywood Media furnishes such non-public information to Key
Brand.
|
|
•
|
|
the
assets of Hollywood Media and its subsidiaries (including securities of
subsidiaries, but excluding sales of assets in the ordinary course of
business) constituting all or substantially all of Hollywood Media’s
consolidated assets;
|
|
•
|
|
50%
or more of the outstanding voting securities of Hollywood Media (including
any merger, tender offer, exchange offer, consolidation, business
combination, arrangement or similar transaction involving Hollywood Media
pursuant to which the shareholders of Hollywood Media immediately
preceding such transaction hold less than 50% of the equity interests in
the surviving or resulting entity of such
transaction);
|
|
•
|
|
acquisition
of assets of Theatre Direct or its subsidiaries (including securities of
subsidiaries, but excluding sales of inventory or obsolete assets in the
ordinary course of business); or
|
|
•
|
|
acquisition
of any of the equity securities of Theatre Direct, in each case, other
than the transactions contemplated by the Stock Purchase
Agreement.
|
|
•
|
|
with
respect to which the board of directors of Hollywood Media shall have in
good faith determined (taking into account the advice of Hollywood Media’s
financial advisors) that the acquiring party is capable of consummating
such proposed acquisition proposal on the terms
proposed;
|
|
•
|
|
the
board of directors of Hollywood Media shall have in good faith determined
(taking into account the advice of Hollywood Media’s financial advisors)
that the proposed acquisition proposal, taking into account all the terms
and conditions of such acquisition proposal including the reasonably
expected time for the consummation of such acquisition proposal, is more
favorable to the shareholders of Hollywood Media, from a financial point
of view, than the transactions contemplated by the Stock Purchase
Agreement (taking into account any proposed modifications by Key Brand in
response thereto); and
|
|
•
|
|
the
board of directors of Hollywood Media shall have in good faith determined
(taking into account the advice of Key Brand’s outside legal counsel) that
accepting such acquisition proposal is advisable under applicable law for
the discharge of its fiduciary
duties.
|
|
•
|
|
to
recognize the service of each employee of Theatre Direct and its
subsidiaries as service with Key Brand under any employee benefit plans
covering or otherwise benefiting such employee after the closing for
purposes of eligibility and vesting but not benefit
accrual;
|
|
•
|
|
to
waive, or cause its insurance carriers to waive, all limitations as to
pre-existing and at-work conditions, if any, with respect to participation
and coverage requirements applicable to employees of Theatre Direct and
its subsidiaries under any welfare benefit plan that is made available to
such employees after the closing;
|
|
•
|
|
to
permit each employee of Theatre Direct and its subsidiaries who
participated in a 401(k) plan sponsored by Hollywood Media to elect to
make direct rollovers of their account balances into a 401(k) plan
maintained by Key Brand or its affiliates as of
closing;
|
|
•
|
|
to
assume certain flexible spending accounts for medical care reimbursements
and dependent care reimbursements maintained by Hollywood Media for
employees of Theatre Direct and its
subsidiaries;
|
|
•
|
|
to
be responsible for, and indemnify and hold Hollywood Media and its
affiliates harmless from and against, all liabilities under the WARN Act
arising due to a termination of employees of Theatre Direct and its
subsidiaries after the closing; provided, however, that at the closing
Hollywood Media shall provide Key Brand with a list of employees of
Theatre Direct and its subsidiaries who have experienced an “employment
loss” within 90 days prior to the Closing Date;
and
|
|
•
|
|
that
the liabilities with respect to any payments associated with a change of
control under the employment agreements with certain employees of Theatre
Direct, up to a maximum amount of $1.6 million in the aggregate, shall be
or remain the liabilities of Theatre Direct from and after the closing
date and Hollywood Media shall have no obligation with respect to such
liabilities up to a maximum of $1.6
million.
|
|
•
|
|
Key
Brand’s access to the properties, business, operations, books and records
of Theatre Direct and its
|
|
•
|
|
Key
Brand’s contact of customers and suppliers of Hollywood Media, Theatre
Direct or their subsidiaries between the date of the Stock Purchase
Agreement and the closing;
|
|
•
|
|
the
filing of this proxy statement with the SEC and cooperation in response to
any comments from the SEC with respect to such proxy
statement;
|
|
•
|
|
coordination
of press releases and other public announcements relating to the
transactions contemplated by the Stock Purchase
Agreement;
|
|
•
|
|
obtaining
certain consents and approvals to consummate the transactions contemplated
by the Stock Purchase Agreement;
|
|
•
|
|
preservation
of records and access to such records after the closing in connection with
any insurance claims, legal proceedings, tax audits, or governmental
investigations of Hollywood Media or Key Brand or any of their affiliates;
and
|
|
•
|
|
use
of the “Hollywood Media Corp.” name and use of other trademarks and trade
names by Hollywood Media following the
closing.
|
|
•
|
|
the
approval of the shareholders of Hollywood Media for the sale of Theatre
Direct; and
|
|
•
|
|
no
law, injunction, judgment or ruling enacted, promulgated, issued, entered,
amended or enforced by any court or governmental authority enjoining,
restraining, preventing or prohibiting consummation of the transactions
contemplated by the Stock Purchase Agreement or making the consummation of
such transactions illegal.
|
|
•
|
|
the
representations and warranties of Key Brand set forth in the Stock
Purchase Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material
respects, at and as of the closing date as though made on the closing
date, except to the extent such representations and warranties relate to
an earlier date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of
such earlier date), and Hollywood Media shall have received a certificate
signed by an authorized officer of Key Brand, dated the closing date, to
the foregoing effect;
|
|
•
|
|
Key
Brand shall have performed and complied in all material respects with all
obligations and agreements required by the Stock Purchase Agreement to be
performed or complied with by Key Brand on or prior to the closing date,
and Hollywood Media shall have received a certificate signed by an
authorized officer of Key Brand, dated the closing date, to the foregoing
effect;
|
|
•
|
|
at
the closing, all documents required to be executed and delivered by Key
Brand (or Theatre Direct) pursuant to the Stock Purchase Agreement have
been delivered to Hollywood Media;
and
|
|
•
|
|
at
the closing, (i) Key Brand has delivered to Hollywood Media a copy of the
written consent from the requisite lenders under the Credit Agreement for
Key Brand to consummate the transactions contemplated by the Stock
Purchase Agreement, and (ii) J.P. Morgan Securities Inc. and any other
lenders under the
|
|
•
|
|
the
representations and warranties of Hollywood Media set forth in the Stock
Purchase Agreement shall be true and correct as of the closing, except to
the extent such representations and warranties relate to an earlier date
(in which case such representations and warranties shall be true and
correct as of such earlier date); provided, however, for purposes of the
condition set forth in this provision any materiality or Material Adverse
Effect qualifications in such representations and warranties shall be
disregarded, and in the event of a breach of a representation or warranty
(after taking into effect disregarding materiality or Material Adverse
Effect qualifications), the condition set forth in this provision shall be
deemed satisfied unless the effect of all such breaches of representations
and warranties taken together have had or are reasonably expect to have a
Material Adverse Effect, and Key Brand shall have received a certificate
signed by an authorized officer of Hollywood Media, dated the closing
date, to the foregoing effect;
|
|
•
|
|
Hollywood
Media shall have performed and complied in all material respects with all
obligations and agreements required by the Stock Purchase Agreement to be
performed or complied with by it on or prior to the closing date, and Key
Brand shall have received a certificate signed by an authorized officer of
Hollywood Media, dated the closing date, to the foregoing
effect;
|
|
•
|
|
no
Material Adverse Effect shall have occurred; provided, however, that for
the purpose of this provision, a large-scale terrorism event in New York
City, New York that (i) results or that could reasonably be expected to
result in a long term and adverse impact on the business of Theatre Direct
and its subsidiaries or (ii) which causes the lenders under the Credit
Agreement to suspend loans to businesses in New York City, New York for a
period of thirty (30) consecutive days or more shall not be deemed to be
an Excluded Matter (as defined above in the definition of “Material
Adverse Effect”);
|
|
•
|
|
Key
Brand receiving a written consent from the requisite lenders under the
Credit Agreement for Key Brand to consummate the transactions contemplated
by the Stock Purchase Agreement and Key Brand being entitled to borrow up
to $15 million under the Credit Agreement towards the payment of the cash
consideration contemplated by the Stock Purchase Agreement, although, Key
Brand informed Hollywood Media that if the lenders under the Credit
Agreement consent to Key Brand using its cash on hand to complete the
transactions contemplated by the Stock Purchase Agreement, then Key Brand
will waive the closing condition of Key Brand being entitled to borrow up
to $15 million under the Credit Agreement towards the payment of the cash
consideration contemplated by the Stock Purchase Agreement;
and
|
|
•
|
|
at
the closing, all documents required to be executed and delivered by
Hollywood Media (or other persons) pursuant to the Stock Purchase
Agreement, and certificates representing the shares of common stock of
Theatre Direct, have been delivered to Key
Brand.
|
|
•
|
|
any
breach of any representation or warranty made by Hollywood Media contained
in the Stock Purchase Agreement or any document delivered in connection
therewith;
|
|
•
|
|
any
breach of or failure to perform, carry out, satisfy or discharge any
covenant or agreement of Hollywood Media contained in the Stock Purchase
Agreement or any document delivered in connection therewith;
and
|
|
•
|
|
any
fees, commissions, or like payments by any person having acted or claiming
to have acted, directly or indirectly, as a broker for Hollywood Media,
Theatre Direct, or its subsidiaries in connection with the transactions
contemplated by the Stock Purchase
Agreement.
|
|
•
|
|
any
breach of any representation or warranty made by Key Brand contained in
the Stock Purchase Agreement or any document delivered in connection
therewith;
|
|
•
|
|
any
breach of or failure to perform, carry out, satisfy or discharge any
covenant or agreement of Key Brand contained in the Stock Purchase
Agreement or any document delivered in connection therewith;
and
|
|
•
|
|
any
fees, commissions, or like payments by any person having acted or claiming
to have acted, directly or indirectly, as a broker for Key Brand in
connection with the transactions contemplated by the Stock Purchase
Agreement.
|
|
•
|
|
imposed
on or payable by Theatre Direct or any of its subsidiaries by reason of
Theatre Direct or any of its subsidiaries being included in any
consolidated, affiliated, combined, unitary or similar group at any time
on or before the closing date;
|
|
•
|
|
imposed
on or payable by Theatre Direct or any of its subsidiaries with respect to
any tax period that ends on or before the closing date or includes the
closing date;
|
|
•
|
|
imposed
as a result of or attributable to any Section 338(h)(10) election;
or
|
|
•
|
attributable
to any breach of the tax representations made in the Stock Purchase
Agreement.
|
|
(i)
|
by
mutual written consent of Hollywood Media and Key
Brand;
|
|
(ii)
|
by
either Hollywood Media or Key Brand
if:
|
|
(iv)
|
by
Key Brand if:
|
|
•
|
|
the
gain is effectively connected with a trade or business of the non-U.S.
Holder in the U.S. (and, if required by an applicable income tax treaty,
is attributable to a U.S. permanent establishment of the non-U.S.
Holder);
|
|
•
|
|
the
non-U.S. Holder is an individual who is present in the U.S. for 183 days
or more in the taxable year of that disposition, and certain other
conditions are met; or
|
|
•
|
|
we
are or have been a “U.S. real property holding corporation” for U.S.
federal income tax purposes and the non-U.S. Holder owns (or has owned)
more than 5% of the outstanding shares of our
stock.
|
|
•
|
|
results
in a “complete termination” of the holder’s stock interest in Hollywood
Media under Section
|
|
•
|
|
is
a “substantially disproportionate” redemption with respect to the holder
under Section 302(b)(2) of the Code;
or
|
|
•
|
|
is
“not essentially equivalent to a dividend” with respect to the holder
under Section 302(b)(1) of the
Code.
|
|
•
|
|
each
person or group known by Hollywood Media to beneficially own more than 5%
of the outstanding shares of common stock of Hollywood
Media;
|
|
•
|
|
each
director and director nominee of Hollywood
Media;
|
|
•
|
|
each
executive officer of Hollywood Media;
and
|
|
•
|
|
all
of the current directors and executive officers of Hollywood Media as a
group.
|
Name
and Address
of
Beneficial Owner(1)
|
Number
of Shares
Beneficially
Owned(2)
|
Percent
of Class(2)
|
||||||
Baker
Street Capital L.P.
|
5,196,676
|
(3)
|
16.67 | % | ||||
Intana
Management, LLC
|
3,055,379 |
(4)
|
9.80 | % | ||||
Morgan
Stanley
|
2,649,011 |
(5)
|
8.49 | % | ||||
CCM
Master Qualified Fund, Ltd.
|
2,632,034 |
(6)
|
8.44 | % | ||||
Mitchell
Rubenstein and Laurie S. Silvers
|
1,816,330 |
(7)
|
5.82 | % | ||||
Potomac
Capital Management LLC
|
1,756,553 |
(8)
|
5.63 | % | ||||
Dimensional
Fund Advisors, LP
|
1,578,227 |
(9)
|
5.06 | % | ||||
Stephen
Gans
|
3,150,753 |
(10)
|
10.11 | % | ||||
Harry
T. Hoffman
|
83,254 |
(11)
|
* | |||||
Scott
Gomez
|
54,986 |
(12)
|
* | |||||
Robert
D. Epstein
|
16,000 |
(13)
|
* | |||||
All
directors, director nominees and executive officers of Hollywood Media as
a group (6 persons)
|
5,121,323 |
(14)
|
16.38 | % |
*
|
Less
than 1%
|
(1)
|
Except
as otherwise noted in the footnotes below, the address of each beneficial
owner is in care of Hollywood Media Corp., 2255 Glades Road, Boca Raton,
Florida 33431.
|
(2)
|
For
purposes of this table, “beneficial ownership” is determined in accordance
with Rule 13d-3 under the Exchange Act, pursuant to which a person’s or
group’s ownership is deemed to include any shares of common stock that
such person has the right to acquire within 60 days. For
purposes of computing the percentage of outstanding shares of common stock
held by each person or group of persons named above, any shares which such
person or persons has the right to acquire within 60 days are deemed to be
outstanding, but such shares are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other
person. This table has been prepared based on 31,179,066 shares
of Hollywood Media common stock outstanding as of October 1,
2010.
|
(3)
|
Based
on a Schedule 13D filed with the SEC on September 30, 2010, Baker Street
Capital L.P., Baker Street Capital Management, LLC and Vadim Perelman
beneficially own such shares. The reported business address for these
holders is 12026 Wilshire Blvd., Unit 502, Los Angeles, California
90025.
|
(4)
|
Based
on a Schedule 13G/A filed with the SEC on February 16, 2010, Intana
Management, LLC and Intana Capital Master Fund, Ltd. beneficially own such
shares. The reported business address for these holders is 505
Park Avenue, 3rd Floor, New York, New York
10022.
|
(5)
|
Based
on a Schedule 13G/A filed with the SEC on February 12, 2010, Morgan
Stanley and Morgan Stanley Capital Services Inc. beneficially own such
shares. The reported business address for these holders is 1585 Broadway,
New York, NY 10036.
|
(6)
|
Based
on a Schedule 13G/A filed with the SEC on February 16, 2010, CCM Master
Qualified Fund, Ltd., Coghill Capital Management, L.L.C. and Clint D.
Coghill have shared voting and shared dispositive power with respect to
such shares. The reported business address for these holders is One North
Wacker Drive, Suite 4350, Chicago, IL
60606.
|
(7)
|
Represents
1,122,790 outstanding shares of common stock which are owned by Mitchell
Rubenstein individually (including 13,560 shares held for his account in
Hollywood Media’s 401(k) plan) and 693,540 outstanding shares of common
stock which are owned individually by Laurie S. Silvers, his wife
(including 13,540 shares held for her account in Hollywood Media’s 401(k)
plan).
|
(8)
|
Based
on a Schedule 13G filed with the SEC on August 29, 2008, Potomac Capital
Management LLC, Potomac Capital Management Inc. and Paul J. Solit
beneficially own such shares, which include an aggregate of 150,000 shares
issuable pursuant to exercisable warrants. The reported business address
for these holders is 825 Third Avenue, 33rd Floor, New York, New York
10022.
|
(9)
|
Based
on a Schedule 13G/A filed with the SEC on February 8, 2010, Dimensional
Fund Advisors, LP beneficially owns such shares. The reported
business address for this holder is Palisades West, Building One, 6300 Bee
Cave Road, Austin, Texas, 78746.
|
(10)
|
Based
on a Form 4 filed with the SEC on May 27, 2010, Mr. Gans beneficially owns
such shares. The reported business address for this holder is
1680 Michigan Avenue, Suite 1001, Miami Beach, Florida
33139.
|
(11)
|
Represents
13,000 outstanding shares of common stock, and 70,254 shares of common
stock issuable pursuant to exercisable options, beneficially owned by Mr.
Hoffman.
|
(12)
|
Represents
44,986 outstanding shares of common stock (including 4,986 shares held for
Mr. Gomez’s account in Hollywood Media’s 401(k) plan), and 10,000 shares
of common stock issuable pursuant to exercisable options, beneficially
owned by Mr. Gomez.
|
(13)
|
Represents
1,000 outstanding shares of common stock, and 15,000 shares of common
stock issuable pursuant to exercisable options, beneficially owned by Mr.
Epstein.
|
(14)
|
Represents
an aggregate of 5,026,069 outstanding shares of common stock and 95,254
shares of common stock issuable pursuant to exercisable
options.
|
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(5)
|
Broadway Ticketing
|
Hollywood Media
Corp.
|
||||||||||
ASSETS
|
||||||||||||
CURRENT
ASSETS:
|
||||||||||||
Cash
and cash equivalents
|
$ | 6,801,204 | $ | 20,733,370 | (1),(2) | $ | 27,534,574 | |||||
Receivables,
net
|
1,043,272 | (428,280 | ) (2) | 614,992 | ||||||||
Inventories
held for sale, net
|
6,275,993 | (6,275,993 | ) (2) | - | ||||||||
Deferred
ticket costs
|
8,906,280 | (8,906,280 | ) (2) | - | ||||||||
Prepaid
expenses
|
2,642,107 | (1,469,018 | ) (2),(4) | 1,173,089 | ||||||||
Other
receivables
|
1,099,180 | (765,135 | ) (2) | 334,045 | ||||||||
Other
current assets
|
25,943 | (25,943 | ) (2) | - | ||||||||
Related
party receivable
|
206,379 | - | 206,379 | |||||||||
Restricted
cash
|
1,221,000 | (1,221,000 | ) (2) | - | ||||||||
Total
current assets
|
28,221,358 | 1,641,721 | 29,863,079 | |||||||||
PROPERTY
AND EQUIPMENT, net
|
3,893,013 | (3,351,730 | ) (2) | 541,283 | ||||||||
INVESTMENTS
IN AND ADVANCES TO UNCONSOLIDATED INVESTEES
|
750,430 | - | 750,430 | |||||||||
INTANGIBLE
ASSETS, net
|
265,104 | (195,862 | ) (2) | 69,242 | ||||||||
GOODWILL
|
20,230,119 | (5,634,336 | ) (2) | 14,595,783 | ||||||||
OTHER
ASSETS
|
21,082 | - | 21,082 | |||||||||
TOTAL
ASSETS
|
$ | 53,381,106 | $ | (7,540,207 | ) | $ | 45,840,899 | |||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||||||
CURRENT
LIABILITIES:
|
||||||||||||
Accounts
payable
|
$ | 1,048,781 | $ | (367,297 | ) (2) | $ | 681,484 | |||||
Accrued
expenses and other
|
2,910,799 | 2,815,396 | (2),(3) | 5,726,195 | ||||||||
Deferred
revenue
|
11,661,726 | (10,607,075 | ) (2) | 1,054,651 | ||||||||
Gift
certificate liability
|
3,601,090 | (3,601,090 | ) (2) | - | ||||||||
Customer
deposits
|
460,682 | (460,682 | ) (2) | - | ||||||||
Current
portion of capital lease obligations
|
75,564 | (4,175 | ) (2) | 71,389 | ||||||||
Current
portion of notes payable
|
15,285 | - | 15,285 | |||||||||
Total
current liabilities
|
19,773,927 | (12,224,923 | ) | 7,549,004 | ||||||||
DEFERRED
REVENUE
|
247,252 | - | 247,252 | |||||||||
CAPITAL
LEASE OBLIGATIONS, less current portion
|
37,440 | - | 37,440 | |||||||||
OTHER
DEFERRED LIABILITY
|
995,932 | (860,643 | ) (2) | 135,289 | ||||||||
NOTES
PAYABLE, less current portion
|
- | - | - | |||||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||||||
SHAREHOLDERS'
EQUITY:
|
||||||||||||
Preferred
Stock, $.01 par value, 1,000,000 shares authorized; none outstanding
|
- | - | - | |||||||||
Common
stock, $.01 par value, 100,000,000 shares authorized; 31,179,066 and
31,037,656 shares issued and outstanding at June , 2010 and
December 31, 2009, respectively
|
311,791 | - | 311,791 | |||||||||
Additional
paid-in capital
|
309,722,146 | - | 309,722,146 | |||||||||
Accumulated
deficit
|
(277,695,246 | ) | 5,545,359 | (4),(9) | (272,149,887 | ) | ||||||
Total
Hollywood Media Corp shareholders' equity
|
32,338,691 | 5,545,359 | 37,884,050 | |||||||||
Non-controlling
interest
|
(12,136 | ) | - | (12,136 | ) | |||||||
32,326,555 | 5,545,359 | 37,871,914 | ||||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 53,381,106 | $ | (7,540,207 | ) | $ | 45,840,899 |
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(7)
|
Broadway Ticketing (8)
|
Hollywood Media Corp.
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 54,908,530 | $ | (54,908,530 | ) | $ | - | |||||
Other
|
2,007,701 | - | 2,007,701 | |||||||||
56,916,231 | (54,908,530 | ) | 2,007,701 | |||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
45,318,633 | (45,318,633 | ) | - | ||||||||
Editorial,
production, development and technology
|
1,329,794 | - | 1,329,794 | |||||||||
Selling,
general and administrative
|
5,401,426 | (3,297,002 | ) | 2,104,424 | ||||||||
Payroll
and benefits
|
5,512,342 | (3,201,637 | ) | 2,310,705 | ||||||||
Depreciation
and amortization
|
757,284 | (449,499 | ) | 307,785 | ||||||||
Total
operating costs and expenses
|
58,319,479 | (52,266,771 | ) | 6,052,708 | ||||||||
Loss
from operations
|
(1,403,248 | ) | (2,641,759 | ) | (4,045,007 | ) | ||||||
EQUITY
IN EARNINGS OF UNCONSOLIDATED INVESTEES
|
548,868 | - | 548,868 | |||||||||
OTHER
INCOME
|
||||||||||||
Interest,
net
|
11,704 | (300 | ) | 11,404 | ||||||||
Other,
net
|
123,134 | 1,300 | 124,434 | |||||||||
Loss
from continuing operations
|
(719,542 | ) | (2,640,759 | ) | (3,360,301 | ) | ||||||
Income
from discontinued operations
|
325,444 | - | 325,444 | |||||||||
Net
loss
|
(394,098 | ) | (2,640,759 | ) | (3,034,857 | ) | ||||||
NET
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
14,700 | - | 14,700 | |||||||||
Net
loss attributable to Hollywood Media Corp
|
$ | (379,398 | ) | $ | (2,640,759 | ) | $ | (3,020,157 | ) | |||
Basic
and diluted loss per common share
|
||||||||||||
Continuing
operations
|
$ | (0.02 | ) | $ | (0.11 | ) | ||||||
Discontinued
operations
|
0.01 | 0.01 | ||||||||||
Total
basic and diluted net loss per share
|
$ | (0.01 | ) | $ | (0.10 | ) | ||||||
Weighted
average common and common equivalent shares outstanding - basic
|
30,907,452 | 30,907,452 | ||||||||||
Weighted
average common and common equivalent shares outstanding - diluted
|
30,907,452 | 30,907,452 |
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(7)
|
Broadway Ticketing (8)
|
Hollywood Media Corp.
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 49,381,447 | $ | (49,381,447 | ) | $ | - | |||||
Other
|
2,184,705 | - | 2,184,705 | |||||||||
51,566,152 | (49,381,447 | ) | 2,184,705 | |||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
41,152,654 | (41,152,654 | ) | - | ||||||||
Editorial,
production, development and technology
|
1,236,913 | - | 1,236,913 | |||||||||
Selling,
general and administrative
|
5,117,994 | (2,848,459 | ) | 2,269,535 | ||||||||
Payroll
and benefits
|
5,038,874 | (2,795,127 | ) | 2,243,747 | ||||||||
Depreciation
and amortization
|
794,968 | (414,194 | ) | 380,774 | ||||||||
Total
operating costs and expenses
|
53,341,403 | (47,210,434 | ) | 6,130,969 | ||||||||
Loss
from operations
|
(1,775,251 | ) | (2,171,013 | ) | (3,946,264 | ) | ||||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||||||
Equity
in earnings of unconsolidated investees
|
1,912,833 | - | 1,912,833 | |||||||||
Impairment
loss
|
(5,000,000 | ) | - | (5,000,000 | ) | |||||||
Total
equity in earnings (losses) of unconsolidated investees
|
(3,087,167 | ) | - | (3,087,167 | ) | |||||||
OTHER
INCOME
|
||||||||||||
Interest,
net
|
15,122 | (7,393 | ) | 7,729 | ||||||||
Other,
net
|
(40,214 | ) | 46,473 | 6,259 | ||||||||
Loss
from continuing operations
|
(4,887,510 | ) | (2,131,933 | ) | (7,019,443 | ) | ||||||
Income
from discontinued operations
|
- | - | - | |||||||||
Net
loss
|
(4,887,510 | ) | (2,131,933 | ) | (7,019,443 | ) | ||||||
NET
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
941 | - | 941 | |||||||||
Net
loss attributable to Hollywood Media Corp
|
$ | (4,886,569 | ) | $ | (2,131,933 | ) | $ | (7,018,502 | ) | |||
Basic
and diluted loss per common share
|
||||||||||||
Continuing
operations
|
$ | (0.16 | ) | $ | (0.23 | ) | ||||||
Discontinued
operations
|
- | - | ||||||||||
Total
basic and diluted net loss per share
|
$ | (0.16 | ) | $ | (0.23 | ) | ||||||
Weighted
average common and common equivalent shares outstanding - basic and
diluted
|
30,528,692 | 30,528,692 |
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(6)
|
Broadway Ticketing (8)
|
Hollywood Media Corp.
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 98,860,362 | $ | (98,860,362 | ) | $ | - | |||||
Other
|
4,518,548 | - | 4,518,548 | |||||||||
103,378,910 | (98,860,362 | ) | 4,518,548 | |||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
81,014,536 | (81,014,536 | ) | - | ||||||||
Editorial,
production, development and technology
|
2,569,354 | - | 2,569,354 | |||||||||
Selling,
general and administrative
|
10,827,719 | (6,487,658 | ) | 4,340,061 | ||||||||
Payroll
and benefits
|
10,574,375 | (5,701,977 | ) | 4,872,398 | ||||||||
Depreciation
and amortization
|
1,590,598 | (846,603 | ) | 743,995 | ||||||||
Total
operating costs and expenses
|
106,576,582 | (94,050,774 | ) | 12,525,808 | ||||||||
Loss
from operations
|
(3,197,672 | ) | (4,809,588 | ) | (8,007,260 | ) | ||||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||||||
Equity
in earnings of unconsolidated investees
|
2,006,498 | - | 2,006,498 | |||||||||
Impairment
loss
|
(5,000,000 | ) | - | (5,000,000 | ) | |||||||
Total
equity in losses of unconsolidated investees
|
(2,993,502 | ) | - | (2,993,502 | ) | |||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest,
net
|
28,922 | (12,761 | ) | 16,161 | ||||||||
Other,
net
|
(75,146 | ) | 123,205 | 48,059 | ||||||||
Loss
from continuing operations
|
(6,237,398 | ) | (4,699,144 | ) | (10,936,542 | ) | ||||||
Income
from discontinued operations
|
614,572 | - | 614,572 | |||||||||
Net
loss
|
(5,622,826 | ) | (4,699,144 | ) | (10,321,970 | ) | ||||||
NET
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
2,409 | - | 2,409 | |||||||||
Net
loss attributable to Hollywood Media Corp
|
$ | (5,620,417 | ) | $ | (4,699,144 | ) | $ | (10,319,561 | ) | |||
Basic
and diluted income (loss) per common share
|
||||||||||||
Continuing
operations
|
$ | (0.20 | ) | $ | (0.36 | ) | ||||||
Discontinued
operations
|
0.02 | 0.02 | ||||||||||
Total
basic and diluted net loss per share
|
$ | (0.18 | ) | $ | (0.34 | ) | ||||||
Weighted
average common and common equivalent shares outstanding - basic and
diluted
|
30,584,902 | 30,584,902 |
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(6)
|
Broadway Ticketing (8)
|
Hollywood Media Corp.
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 110,918,969 | $ | (110,918,969 | ) | $ | - | |||||
Other
|
6,138,962 | - | 6,138,962 | |||||||||
117,057,931 | (110,918,969 | ) | 6,138,962 | |||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
92,882,066 | (92,882,066 | ) | - | ||||||||
Editorial,
production, development and technology
|
3,323,546 | - | 3,323,546 | |||||||||
Selling,
general and administrative
|
13,932,852 | (7,996,054 | ) | 5,936,798 | ||||||||
Payroll
and benefits
|
13,284,857 | (6,631,118 | ) | 6,653,739 | ||||||||
Impairment
Loss
|
3,524,697 | - | 3,524,697 | |||||||||
Depreciation
and amortization
|
2,224,831 | (876,049 | ) | 1,348,782 | ||||||||
Total
operating costs and expenses
|
129,172,849 | (108,385,287 | ) | 20,787,562 | ||||||||
Loss
from operations
|
(12,114,918 | ) | (2,533,682 | ) | (14,648,600 | ) | ||||||
EQUITY
IN EARNINGS OF UNCONSOLIDATED INVESTEES
|
1,160,623 | - | 1,160,623 | |||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest,
net
|
425,251 | (65,451 | ) | 359,800 | ||||||||
Other,
net
|
44,958 | (1,260 | ) | 43,698 | ||||||||
Loss
from continuing operations
|
(10,484,086 | ) | (2,600,393 | ) | (13,084,479 | ) | ||||||
Loss
on sale of discontinued operations, net of income taxes
|
(4,655,122 | ) | - | (4,655,122 | ) | |||||||
Loss
from discontinued operations
|
(1,635,750 | ) | - | (1,635,750 | ) | |||||||
Loss
from discontinued operations
|
(6,290,872 | ) | - | (6,290,872 | ) | |||||||
Net
loss
|
(16,774,958 | ) | (2,600,393 | ) | (19,375,351 | ) | ||||||
NET
INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
(81,365 | ) | - | (81,365 | ) | |||||||
Net
loss attributable to Hollywood Media Corp
|
$ | (16,856,323 | ) | $ | (2,600,393 | ) | $ | (19,456,716 | ) | |||
Basic
and diluted loss per common share
|
||||||||||||
Continuing
operations
|
$ | (0.33 | ) | $ | (0.41 | ) | ||||||
Discontinued
operations
|
(0.20 | ) | (0.20 | ) | ||||||||
Total
basic and diluted net loss per share
|
$ | (0.53 | ) | $ | (0.61 | ) | ||||||
Weighted
average common and common equivalent shares outstanding - basic and
diluted
|
31,793,853 | 31,793,853 |
Historical
|
Sale of
|
Pro Forma
|
||||||||||
Hollywood Media Corp.(6)
|
Broadway Ticketing (8)
|
Hollywood Media Corp.
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 111,792,068 | $ | (111,792,068 | ) | $ | - | |||||
Other
|
6,369,156 | - | 6,369,156 | |||||||||
118,161,224 | (111,792,068 | ) | 6,369,156 | |||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
94,017,924 | (94,017,924 | ) | - | ||||||||
Editorial,
production, development and technology
|
3,590,192 | - | 3,590,192 | |||||||||
Selling,
general and administrative
|
14,269,974 | (8,063,461 | ) | 6,206,513 | ||||||||
Payroll
and benefits
|
13,368,817 | (6,707,021 | ) | 6,661,796 | ||||||||
Depreciation
and amortization
|
1,378,492 | (351,310 | ) | 1,027,182 | ||||||||
Total
operating costs and expenses
|
126,625,399 | (109,139,716 | ) | 17,485,683 | ||||||||
Loss
from operations
|
(8,464,175 | ) | (2,652,352 | ) | (11,116,527 | ) | ||||||
EQUITY
IN EARNINGS OF UNCONSOLIDATED INVESTEES
|
4,747 | - | 4,747 | |||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest,
net
|
199,437 | (74,468 | ) | 124,969 | ||||||||
Other,
net
|
(50,935 | ) | 35,559 | (15,376 | ) | |||||||
Loss
from continuing operations
|
(8,310,926 | ) | (2,691,261 | ) | (11,002,187 | ) | ||||||
Gain
on sale of discontinued operations, net of income taxes
|
10,254,287 | - | 10,254,287 | |||||||||
Loss
from discontinued operations
|
(211,993 | ) | - | (211,993 | ) | |||||||
Income
from discontinued operations
|
10,042,294 | - | 10,042,294 | |||||||||
Net
income (loss)
|
1,731,368 | (2,691,261 | ) | (959,893 | ) | |||||||
NET
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
3,241 | - | 3,241 | |||||||||
Net
income (loss) attributable to Hollywood Media Corp
|
$ | 1,734,609 | $ | (2,691,261 | ) | $ | (956,652 | ) | ||||
Basic
and diluted income (loss) per common share
|
||||||||||||
Continuing
operations
|
$ | (0.25 | ) | $ | (0.33 | ) | ||||||
Discontinued
operations
|
0.30 | 0.30 | ||||||||||
Total
basic and diluted net gain (loss) per share
|
$ | 0.05 | $ | (0.03 | ) | |||||||
Weighted
average common and common equivalent shares outstanding - basic and
diluted
|
33,303,886 | 33,303,886 |
(1)
|
To
record the cash proceeds of $20,000,000.
|
(2)
|
Represents
adjustments to eliminate assets and liabilities of the Broadway Ticketing
businesses.
|
(3)
|
The
amount includes an accrual for estimated transaction expenses, costs and
fees associated with the sale of $4,437,531.
|
(4)
|
To
record the gain on sale of the stock of the Broadway Ticketing
business. The note receivable, earnout receivable and put/call
option were recorded at fair value.
|
The
reconciliation of net gain is as follows:
|
||||
Proceeds
received
|
$ | 20,000,000 | ||
Working
capital
|
3,079,301 | |||
Net
assets sold
|
(11,896,411 | ) | ||
Prepaid
transaction costs
|
(1,200,000 | ) | ||
Accrued
transaction expense
|
(4,437,531 | ) | ||
Net
gain
|
$ | 5,545,359 |
(5)
|
Represents
the Condensed Consolidated Balance Sheet included in the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 2010.
|
(6)
|
Represents
the Condensed Consolidated Statements of Operations included in the
Company's Annual Report on Form 10-K for the years ended December 31,
2009, 2008 and 2007, as applicable.
|
(7)
|
Represents
the Condensed Consolidated Statements of Operations included in the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 2010
and 2009, as applicable.
|
(8)
|
Represents
adjustments to eliminate the results of operations of the Broadway
Ticketing business that the Company believes are directly attributable to
the sale and are factually supportable and will not continue after sale.
|
(9)
|
The
note receivable, earnout receivable and put/call option have been valued
at fair value and fully reserved for in the proforma financial statements.
|
ASSETS
|
||||
CURRENT
ASSETS:
|
||||
Cash
and cash equivalents
|
$ | 2,345,931 | ||
Receivables,
net
|
428,280 | |||
Inventories
held for sale, net
|
6,275,993 | |||
Deferred
ticket costs
|
8,906,280 | |||
Prepaid
expenses
|
269,018 | |||
Other
receivables
|
765,135 | |||
Other
current assets
|
25,943 | |||
Restricted
cash
|
1,221,000 | |||
Total
current assets
|
20,237,580 | |||
PROPERTY
AND EQUIPMENT, net
|
3,351,730 | |||
INTANGIBLE
ASSETS, net
|
195,862 | |||
GOODWILL
|
5,634,336 | |||
TOTAL
ASSETS
|
$ | 29,419,508 | ||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||
CURRENT
LIABILITIES:
|
||||
Accounts
payable
|
$ | 367,297 | ||
Accrued
expenses and other
|
1,622,135 | |||
Deferred
revenue
|
10,607,075 | |||
Gift
certificate liability
|
3,601,090 | |||
Customer
deposits
|
460,682 | |||
Current
portion of capital lease obligations
|
4,175 | |||
Total
current liabilities
|
16,662,454 | |||
OTHER
DEFERRED LIABILITY
|
860,643 | |||
COMMITMENTS
AND CONTINGENCIES
|
||||
SHAREHOLDERS'
EQUITY:
|
||||
Additional
paid-in capital
|
17,516,796 | |||
Prior
year retained earnings
|
(8,261,144 | ) | ||
Current
period income
|
2,640,759 | |||
Total
shareholder's equity
|
11,896,411 | |||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 29,419,508 |
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
NET
REVENUES
|
||||||||
Ticketing
|
$ | 54,908,530 | $ | 49,381,447 | ||||
OPERATING
COSTS AND EXPENSES
|
||||||||
Cost
of revenues - ticketing
|
45,318,633 | 41,152,654 | ||||||
Selling,
general and administrative
|
3,297,002 | 2,848,459 | ||||||
Payroll
and benefits
|
3,201,637 | 2,795,127 | ||||||
Depreciation
and amortization
|
449,499 | 414,194 | ||||||
Total
operating costs and expenses
|
52,266,771 | 47,210,434 | ||||||
Income
from operations
|
2,641,759 | 2,171,013 | ||||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest,
net
|
300 | 7,393 | ||||||
Other,
net
|
(1,300 | ) | (46,473 | ) | ||||
Net
income
|
$ | 2,640,759 | $ | 2,131,933 |
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 98,860,362 | $ | 110,918,969 | $ | 111,792,068 | ||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
81,014,536 | 92,882,066 | 94,017,924 | |||||||||
Selling,
general and administrative
|
6,487,658 | 7,996,054 | 8,063,461 | |||||||||
Payroll
and benefits
|
5,701,977 | 6,631,118 | 6,707,021 | |||||||||
Depreciation
and amortization
|
846,603 | 876,049 | 351,310 | |||||||||
Total
operating costs and expenses
|
94,050,774 | 108,385,287 | 109,139,716 | |||||||||
Income
from operations
|
4,809,588 | 2,533,682 | 2,652,352 | |||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest,
net
|
12,761 | 65,451 | 74,468 | |||||||||
Other,
net
|
(123,205 | ) | 1,260 | (35,559 | ) | |||||||
Net
income
|
$ | 4,699,144 | $ | 2,600,393 | $ | 2,691,261 |
Six months ended June 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 2,640,759 | $ | 2,131,933 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
and amortization
|
449,499 | 414,194 | ||||||
401
(k) stock match
|
51,112 | 50,676 | ||||||
Provision
for bad debts
|
- | (34,735 | ) | |||||
Impairment
on inventories held for sale
|
150,000 | - | ||||||
Changes
in assets and liabilities
|
||||||||
Receivables
|
(135,102 | ) | (146,033 | ) | ||||
Inventories
held for sale
|
(2,690,302 | ) | (1,364,654 | ) | ||||
Deferred
ticket costs
|
2,078,880 | 3,702,806 | ||||||
Prepaid
expenses
|
(180,430 | ) | 25,533 | |||||
Other
receivables
|
15,269 | 205,794 | ||||||
Other
current assets
|
410,732 | 79,462 | ||||||
Other
assets
|
- | 38,579 | ||||||
Restricted
cash
|
- | (1,221,000 | ) | |||||
Inter-company
|
(378,656 | ) | (1,519,375 | ) | ||||
Accounts
payable
|
(197,787 | ) | 89 | |||||
Accrued
expenses and other
|
(180,258 | ) | (431,894 | ) | ||||
Deferred
revenue
|
(2,228,467 | ) | (3,852,617 | ) | ||||
Gift
certificate liability
|
(193,809 | ) | (430,163 | ) | ||||
Customer
deposits
|
(487,591 | ) | (216,037 | ) | ||||
Other
deferred liability
|
(8,652 | ) | (110 | ) | ||||
Net
cash used in operating activities
|
(884,803 | ) | (2,567,552 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Capital
expenditures
|
(152,946 | ) | (932,085 | ) | ||||
Acquistion
of businesses, net of cash acquired
|
647 | - | ||||||
Loss
on disposition of assets
|
- | (23,946 | ) | |||||
Net
cash used in investing activities
|
(152,299 | ) | (956,031 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Payments
under capital lease obligations
|
(16,553 | ) | (35,978 | ) | ||||
Net
cash used in financing activities
|
(16,553 | ) | (35,978 | ) | ||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(1,053,655 | ) | (3,559,561 | ) | ||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
3,399,586 | 7,281,693 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 2,345,931 | $ | 3,722,132 | ||||
SUPPLEMENTAL
SCHEDULE OF CASH RELATED ACTIVITIES:
|
||||||||
Interest
paid
|
$ | 1,182 | $ | 4,716 | ||||
Income
taxes paid
|
$ | 1,336 | $ | - |
Year ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
income
|
$ | 4,699,144 | $ | 2,600,393 | $ | 2,691,261 | ||||||
Adjustments
to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation
and amortization
|
846,603 | 876,049 | 351,310 | |||||||||
401
(k) stock match
|
80,597 | 90,124 | 86,238 | |||||||||
Provision
for bad debts
|
(43,008 | ) | (102,707 | ) | 17,407 | |||||||
Loss
on retirement of property
|
159,788 | 17,502 | - | |||||||||
Changes
in assets and liabilities
|
||||||||||||
Receivables
|
319,890 | 118,593 | (227,865 | ) | ||||||||
Inventories
held for sale
|
756,150 | (541,263 | ) | (576,451 | ) | |||||||
Deferred
ticket costs
|
1,100,077 | 4,396,623 | (1,208,536 | ) | ||||||||
Prepaid
expenses
|
52,065 | 164,289 | (142,964 | ) | ||||||||
Other
receivables
|
107,099 | 2,374,474 | (1,376,580 | ) | ||||||||
Other
current assets
|
(336,730 | ) | 529,353 | (433,329 | ) | |||||||
Other
assets
|
41,979 | 9,734 | 51,017 | |||||||||
Restricted
cash
|
(1,221,000 | ) | - | - | ||||||||
Inter-company
|
(8,803,086 | ) | (1,026,791 | ) | 3,665,245 | |||||||
Accounts
payable
|
(263,046 | ) | (1,071,143 | ) | 1,248,852 | |||||||
Accrued
expenses and other
|
301,099 | (420,606 | ) | (1,058,907 | ) | |||||||
Deferred
revenue
|
(1,020,567 | ) | (5,115,365 | ) | 1,438,175 | |||||||
Gift
certificate liability
|
360,540 | 633,059 | (480,942 | ) | ||||||||
Customer
deposits
|
116,435 | (1,096,518 | ) | 152,643 | ||||||||
Other
deferred liability
|
3,264 | 254,792 | 608,207 | |||||||||
Net
cash provided by (used in) operating activities
|
(2,742,707 | ) | 2,690,592 | 4,804,781 | ||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Capital
expenditures
|
(1,088,501 | ) | (791,356 | ) | (2,725,762 | ) | ||||||
Acquisition
of business, net of cash acquired
|
- | (43,313 | ) | (2,690,659 | ) | |||||||
Acquisition
of intangible asset
|
- | (17,000 | ) | (59,470 | ) | |||||||
Loss
on disposition of assets
|
- | - | (3,987 | ) | ||||||||
Proceeds
from property and equipment sales
|
- | - | 13,368 | |||||||||
Net
cash used in investing activities
|
(1,088,501 | ) | (851,669 | ) | (5,466,510 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Payments
under capital lease obligations
|
(50,899 | ) | (73,094 | ) | (41,189 | ) | ||||||
Net
cash used in financing activities
|
(50,899 | ) | (73,094 | ) | (41,189 | ) | ||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(3,882,107 | ) | 1,765,829 | (702,918 | ) | |||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
7,281,693 | 5,515,864 | 6,218,782 | |||||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 3,399,586 | $ | 7,281,693 | $ | 5,515,864 | ||||||
SUPPLEMENTAL
SCHEDULE OF CASH RELATED ACTIVITIES:
|
||||||||||||
Interest
paid
|
$ | 7,042 | $ | 21,341 | $ | 29,586 | ||||||
Income
taxes paid
|
$ | 1,929 | $ | - | $ | - |
YEARS ENDED DECEMBER 31,
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
STATEMENT
OF OPERATIONS DATA:
|
||||||||||||||||||||
Net
revenues
|
||||||||||||||||||||
Ticketing
|
$ | 98,860,362 | $ | 110,918,969 | $ | 111,792,068 | $ | 98,661,705 | $ | 79,189,987 | ||||||||||
Other
|
4,518,548 | 6,138,962 | 6,369,156 | 5,862,715 | 2,025,776 | |||||||||||||||
Total
net revenues
|
103,378,910 | 117,057,931 | 118,161,224 | 104,524,420 | 81,215,763 | |||||||||||||||
Operating
Costs and Expenses
|
||||||||||||||||||||
Cost
of revenues - ticketing
|
81,014,536 | 92,882,066 | 94,017,924 | 82,496,590 | 68,179,732 | |||||||||||||||
Editorial,
production, development and technology
|
2,569,354 | 3,323,546 | 3,590,192 | 3,165,383 | 1,022,850 | |||||||||||||||
Selling,
general and
administrative
|
10,827,719 | 13,932,852 | 14,269,974 | 13,354,795 | 9,472,084 | |||||||||||||||
Payroll
& benefits
|
10,574,375 | 13,284,857 | 13,368,817 | 12,100,816 | 11,425,999 | |||||||||||||||
Impairment
loss
|
- | 3,524,697 | - | - | - | |||||||||||||||
Depreciation
and amortization
|
1,590,598 | 2,224,831 | 1,378,492 | 1,293,797 | 891,540 | |||||||||||||||
Total
operating costs and expenses
|
106,576,582 | 129,172,849 | 126,625,399 | 112,411,381 | 90,992,205 | |||||||||||||||
Loss
from operations
|
(3,197,672 | ) | (12,114,918 | ) | (8,464,175 | ) | (7,886,961 | ) | (9,776,442 | ) | ||||||||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||||||||||||||
Equity
in earnings of unconsolidated investees
|
2,006,498 | 1,160,623 | 4,747 | 12,227 | 533,228 | |||||||||||||||
Impairment
loss
|
(5,000,000 | ) | - | - | - | - | ||||||||||||||
Total
equity in earnings (losses) of unconsolidated investees
|
(2,993,502 | ) | 1,160,623 | 4,747 | 12,227 | 533,228 | ||||||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||||||
Interest,
net
|
28,922 | 425,251 | 199,437 | (1,787,735 | ) | (542,935 | ) | |||||||||||||
Change
in derivative liability
|
- | - | - | 640,536 | 87,037 | |||||||||||||||
Other,
net
|
(75,146 | ) | 44,958 | (50,935 | ) | 9,430 | 40,803 | |||||||||||||
Loss
from continuing operations
|
(6,237,398 | ) | (10,484,086 | ) | (8,310,926 | ) | (9,012,503 | ) | (9,658,309 | ) | ||||||||||
Gain
(loss) on sale of discontinued operations, net of income taxes
|
614,572 | (4,655,122 | ) | 10,254,287 | 16,328,241 | - | ||||||||||||||
Income
(loss) from discontinued operations
|
- | (1,635,750 | ) | (211,993 | ) | 2,201,865 | 913,234 | |||||||||||||
Income
(loss) from discontinued operations
|
614,572 | (6,290,872 | ) | 10,042,294 | 18,530,106 | 913,234 | ||||||||||||||
Net
income (loss)
|
(5,622,826 | ) | (16,774,958 | ) | 1,731,368 | 9,517,603 | (8,745,075 | ) | ||||||||||||
NET
INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
2,409 | (81,365 | ) | 3,241 | 4,910 | (168,107 | ) | |||||||||||||
Net
income (loss) attributable to Hollywood Media Corp.
|
$ | (5,620,417 | ) | $ | ( 16,856,323 | ) | $ | 1,734,609 | $ | 9,522,513 | $ | (8,913,182 | ) | |||||||
Basic
and diluted income (loss) per common share
|
||||||||||||||||||||
Continuing
operations
|
$ | (0.20 | ) | $ | (0.33 | ) | $ | (0.25 | ) | $ | (0.28 | ) | $ | (0.31 | ) | |||||
Discontinued
operations
|
0.02 | (0.20 | ) | 0.30 | 0.57 | 0.03 | ||||||||||||||
Total
basic and diluted net income (loss) per share
|
$ | (0.18 | ) | $ | (0.53 | ) | $ | 0.05 | $ | 0.29 | $ | (0.28 | ) | |||||||
Weighted
average common and common equivalent shares outstanding – basic and
diluted
|
30,584,902 | 31,793,853 | 33,303,886 | 32,761,848 | 31,470,307 |
AS OF DECEMBER 31,
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
CONSOLIDATED
BALANCE SHEET DATA:
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ | 11,764,810 | $ | 12,685,946 | $ | 26,758,550 | $ | 27,448,649 | $ | 6,926,313 | ||||||||||
Working
capital (deficit)
|
8,774,819 | 8,876,128 | 20,128,557 | 16,380,362 | (3,396,040 | ) | ||||||||||||||
Total
assets
|
57,606,179 | 66,938,861 | 93,978,836 | 100,009,604 | 83,302,950 | |||||||||||||||
Capital
lease obligations, including current portion
|
198,891 | 407,480 | 397,780 | 77,588 | 106,993 | |||||||||||||||
Convertible
debentures - net
|
- | - | - | - | 940,927 | |||||||||||||||
Senior
Unsecured Notes
|
- | - | - | 6,375,399 | 5,402,255 | |||||||||||||||
Total
shareholders’ equity
|
$ | 32,490,409 | $ | 37,758,880 | $ | 55,567,474 | $ | 55,761,457 | $ | 42,487,230 |
SIX MONTHS ENDED
JUNE 30,
|
||||||||
2010
|
2009
|
|||||||
STATEMENT
OF OPERATIONS DATA:
|
||||||||
NET
REVENUES
|
||||||||
Ticketing
|
$ | 54,908,530 | $ | 49,381,447 | ||||
Other
|
2,007,701 | 2,184,705 | ||||||
56,916,231 | 51,566,152 | |||||||
OPERATING
COSTS AND EXPENSES
|
||||||||
Cost
of revenues - ticketing
|
45,318,633 | 41,152,654 | ||||||
Editorial,
production, development and technology
|
1,329,794 | 1,236,913 | ||||||
Selling,
general and administrative
|
5,401,426 | 5,117,994 | ||||||
Payroll
and benefits
|
5,512,342 | 5,038,874 | ||||||
Depreciation
and amortization
|
757,284 | 794,968 | ||||||
Total
operating costs and expenses
|
58,319,479 | 53,341,403 | ||||||
Loss
from operations
|
(1,403,248 | ) | (1,775,251 | ) | ||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||
Equity
in earnings (losses) of unconsolidated investees
|
548,868 | 1,912,833 | ||||||
Impairment
loss
|
- | (5,000,000 | ) | |||||
Total
equity in earnings (losses) of unconsolidated investees
|
548,868 | (3,087,167 | ) | |||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest,
net
|
11,704 | 15,122 | ||||||
Other,
net
|
123,134 | (40,214 | ) | |||||
Loss
from continuing operations
|
(719,542 | ) | (4,887,510 | ) | ||||
Income
from discontinued operations
|
325,444 | - | ||||||
Net
loss
|
(394,098 | ) | (4,887,510 | ) | ||||
NET
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
14,700 | 941 | ||||||
Net
loss attributable to Hollywood Media Corp
|
$ | (379,398 | ) | $ | (4,886,569 | ) | ||
Basic
and diluted income (loss) per common share
|
||||||||
Continuing
operations
|
$ | (0.02 | ) | $ | (0.16 | ) | ||
Discontinued
operations
|
0.01 | - | ||||||
Total
basic and diluted net loss per share
|
$ | (0.01 | ) | $ | (0.16 | ) | ||
Weighted
average common and common equivalent shares outstanding - basic and
diluted
|
30,907,452 | 30,528,692 |
SIX MONTHS ENDED
JUNE 30,
|
||||||||
2010
|
2009
|
|||||||
CONSOLIDATED
BALANCE SHEET DATA:
|
||||||||
Cash
and cash equivalents
|
$ | 6,801,204 | $ | 8,394,861 | ||||
Working
capital
|
8,447,431 | 8,839,236 | ||||||
Total
assets
|
53,381,106 | 54,170,460 | ||||||
Capital
lease obligations, including current portion
|
113,004 | 274,511 | ||||||
Total
shareholders' equity
|
$ | 32,326,555 | $ | 33,048,696 |
By
Order of the Board of Directors,
|
![]() |
Mitchell
Rubenstein
|
Chairman
of the Board and Chief Executive Officer
|
Boca
Raton, FL
|
[___],
2010
|
ARTICLE
I
|
DEFINITIONS
|
1
|
1.1
|
Certain
Definitions
|
1
|
1.2
|
Terms
Defined Elsewhere in this Agreement
|
7
|
1.3
|
Other
Definitional and Interpretive Matters
|
9
|
ARTICLE
II
|
SALE
AND PURCHASE OF SHARES
|
11
|
2.1
|
Sale
and Purchase of Shares
|
11
|
ARTICLE
III
|
PURCHASE
PRICE
|
11
|
3.1
|
Purchase
Price
|
11
|
3.2
|
Deposit
Amount; Payment of Purchase Price
|
11
|
3.3
|
Purchase
Price Adjustment
|
12
|
3.4
|
Delivery
of Shares
|
14
|
3.5
|
Other
Closing Deliveries by the Selling Stockholder
|
14
|
3.6
|
Closing
Deliveries by Purchaser
|
14
|
3.7
|
Earnout
|
15
|
ARTICLE
IV
|
CLOSING
AND TERMINATION
|
18
|
4.1
|
Closing
Date
|
18
|
4.2
|
Termination
of Agreement
|
18
|
4.3
|
Procedure
Upon Termination
|
20
|
4.4
|
Effect
of Termination
|
20
|
4.5
|
Termination
Fee
|
22
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLING STOCKHOLDER
|
23
|
5.1
|
Organization
and Good Standing
|
23
|
5.2
|
Authorization
of Agreement
|
24
|
5.3
|
Conflicts;
Consents of Third Parties
|
24
|
5.4
|
Capitalization
|
25
|
5.5
|
Ownership
of Assets and Shares and Transfer of Shares
|
25
|
5.6
|
Subsidiary
|
25
|
5.7
|
Financial
Statements
|
26
|
5.8
|
No
Undisclosed Liabilities
|
26
|
5.9
|
Absence
of Certain Changes or Events
|
27
|
5.10
|
Taxes
|
27
|
5.11
|
Real
Property
|
28
|
5.12
|
Tangible
Personal Property
|
28
|
5.13
|
Intellectual
Property
|
28
|
5.14
|
Material
Contracts
|
29
|
5.15
|
Employee
Benefits Plans
|
31
|
5.16
|
Labor
|
32
|
5.17
|
Litigation
|
32
|
5.18
|
Compliance
with Laws; Permits
|
32
|
5.19
|
Environmental
Matters
|
33
|
5.20
|
Financial
Advisors
|
33
|
5.21
|
Insurance
|
34
|
5.22
|
Bank
Accounts
|
34
|
5.23
|
Net
Operating Losses
|
34
|
5.24
|
No
Other Representations or Warranties; Schedules
|
34
|
ARTICLE
VI
|
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
|
34
|
6.1
|
Organization
and Good Standing
|
34
|
6.2
|
Authorization
of Agreement
|
35
|
6.3
|
Conflicts;
Consents of Third Parties
|
35
|
6.4
|
Litigation
|
35
|
6.5
|
Investment
Intention
|
35
|
6.6
|
Financial
Advisors
|
36
|
6.7
|
Financial
Capability
|
36
|
6.8
|
No
Discussions
|
36
|
6.9
|
No
Other Representations by Selling Stockholder
|
36
|
ARTICLE
VII
|
COVENANTS
|
37
|
7.1
|
Access
to Information
|
37
|
7.2
|
Preparation
of the Proxy Statement; Shareholders Meeting
|
38
|
7.3
|
Conduct
of the Business Pending the Closing
|
38
|
7.4
|
Non-Solicitation
|
42
|
7.5
|
Reasonable
Best Efforts
|
45
|
7.6
|
Selling
Stockholder Guarantees
|
45
|
7.7
|
Public
Announcements
|
46
|
7.8
|
Consents
|
46
|
7.9
|
Non-Competition
Agreements
|
46
|
7.10
|
Further
Assurances
|
47
|
7.11
|
Preservation
of Records
|
47
|
7.12
|
Use
of Name
|
48
|
7.13
|
Employment
and Employee Benefits.
|
48
|
7.14
|
Financing
|
49
|
7.15
|
Customer
Lists and Data Base
|
50
|
ARTICLE
VIII
|
50
|
|
8.1
|
Conditions
Precedent to Each Party’s Obligation to Effect the Transactions
|
50
|
8.2
|
Conditions
Precedent to Obligations of Purchaser
|
50
|
8.3
|
Conditions
Precedent to Obligations of the Selling Stockholder
|
51
|
ARTICLE
IX
|
TERMINATION
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; SECTION 338(H)(10)
ELECTION
|
52
|
9.1
|
Termination
of Representations and Warranties
|
52
|
9.2
|
Indemnification
by the Selling Stockholder
|
53
|
9.3
|
Indemnification
by Purchaser
|
53
|
9.4
|
Procedures
|
54
|
9.5
|
Limits
on Indemnification
|
55
|
9.6
|
Section
338(h)(10) Election
|
57
|
9.7
|
Tax
Indemnification
|
58
|
ARTICLE
X
|
MISCELLANEOUS
|
58
|
10.1
|
Payment
of Sales, Use or Similar Taxes
|
58
|
10.2
|
Expenses
|
58
|
10.3
|
Submission
to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial
|
58
|
10.4
|
Entire
Agreement; Amendments and Waivers
|
59
|
10.5
|
Governing
Law
|
59
|
10.6
|
Notices
|
60
|
10.7
|
Severability
|
61
|
10.8
|
Binding
Effect; Assignment
|
61
|
10.9
|
Non-Recourse
|
61
|
10.10
|
Counterparts
|
61
|
10.11
|
Specific
Enforcement
|
61
|
10.12
|
Attorneys'
Fees
|
62
|
Exhibit
A:
|
Terms
of Note
|
Exhibit
B:
|
Form
of Warrant
|
Exhibit
C:
|
Form
of Selling Stockholder Release
|
Exhibit
D
|
Form
of Transition Services Agreement
|
Exhibit
E:
|
Form
of Non-Competition Agreement
|
Schedule
1.1(a)
|
Closing
Working Capital Sample Calculations
|
Schedule
1.1(b)
|
Knowledge
of the Purchaser
|
Schedule
1.1(c)
|
Knowledge
of the Selling Stockholder
|
Schedule
5.3(a)
|
Selling
Stockholder’s Conflicts
|
Schedule
5.3(b)
|
Selling
Stockholder’s Consents
|
Schedule
5.4(b)
|
Capitalization
|
Schedule
5.5(b)
|
Options/Warrants
|
Schedule
5.5(c)
|
Sufficiency
of Assets
|
Schedule
5.6(a)
|
Subsidiary
|
Schedule
5.6(b)
|
Ownership
of Subsidiary’ Shares
|
Schedule
5.7(a)
|
Financial
Statements
|
Schedule
5.7(b)
|
GAAP
Matters
|
Schedule
5.8
|
Undisclosed
Liabilities
|
Schedule
5.10
|
Taxes
|
Schedule
5.11
|
Real
Property Leases
|
Schedule
5.12
|
Personal
Property Leases
|
Schedule
5.13(a)
|
Intellectual
Property
|
Schedule
5.13(b)
|
Intellectual
Property Licensing
|
Schedule
5.13(c)
|
Intellectual
Property Infringement
|
Schedule
5.14(a)
|
Material
Contracts
|
Schedule
5.14(b)
|
Material
Contract Defaults
|
Schedule
5.15(a)
|
Employee
Benefit Plans
|
Schedule
5.16(a)
|
Labor
and Collective Bargaining Agreements
|
Schedule
5.16(b)
|
Labor
|
Schedule
5.16(c)
|
List
of Employees
|
Schedule
5.17
|
Litigation
|
Schedule
5.18(a)
|
Violation
of Laws
|
Schedule
5.19
|
Environmental
Matters
|
Schedule
5.20
|
Financial
Advisors
|
Schedule
5.21
|
Insurance
Policies
|
Schedule
5.22
|
Bank
Accounts
|
Schedule
5.23
|
Net
Operating Losses
|
Schedule
6.3(a)
|
Purchaser’s
Conflicts
|
Schedule
6.3(b)
|
Purchaser’s
Consents
|
Schedule
6.6
|
Financial
Advisors
|
Schedule
7.3(a)(iii)
|
Transactions
with Third Party
|
Schedule
7.3(b)
|
Conduct
of the Business
|
Schedule
7.6
|
Assurance
Agreements
|
Schedule
7.9
|
Purchaser
Competition Covenant
|
Schedule
7.12
|
Purchased
Marks
|
Term
|
Section
|
|
Acquisition
Agreement
|
7.4(b)
|
|
Acquisition
Proposal
|
7.4(d)
|
|
Adverse
Recommendation Change
|
7.4(b)
|
|
Agreement
|
Preamble
|
|
Allocation
Statement
|
9.6(d)
|
|
Assurance
Agreements
|
7.6
|
|
Balance
Sheets
|
5.7(a)
|
|
Balance
Sheet Date
|
5.7(a)
|
|
Balance
Sheet Liabilities
|
5.8
|
|
Board
of Directors
|
7.2(b)
|
|
Board
Recommendation
|
7.2(b)
|
|
Cash
Consideration
|
3.1
|
|
Closing
|
4.1
|
|
Closing
Cash Consideration
|
3.3(a)
|
|
Closing
Date
|
4.1
|
|
Closing
Statement
|
3.3(b)
|
|
Closing
Working Capital
|
3.3(b)
|
Term
|
Section
|
|
Company
Benefit Plan
|
5.15(a)
|
|
Company
Employee
|
7.13(a)
|
|
Company
Pension Plan
|
5.15(b)
|
|
Company
Shareholder Approval
|
5.2
|
|
Deposit
Account
|
3.2(a)
|
|
Deposit
Amount
|
3.2(a)
|
|
Earnout
Payment Amount
|
3.7(c)
|
|
Environmental
Permits
|
5.19(a)
|
|
ERISA
|
5.15(a)
|
|
Estimated
Losses
|
9.5(f)
|
|
Estimated
Working Capital
|
3.3(a)
|
|
Excluded
Matter
|
1.1
(in definition of Material Adverse Effect)
|
|
Final
Working Capital
|
3.3(e)
|
|
Financial
Statements
|
5.7(a)
|
|
Financing
|
6.7
|
|
Fundamental
Representations
|
9.1
|
|
Indemnified
Party
|
9.4(a)
|
|
Indemnifying
Party
|
9.4(a)
|
|
Independent
Accountant
|
3.3(c)
|
|
Intentional
Breach
|
9.1
|
|
JPM
|
6.7
|
|
JPM
Consent
|
8.2(d)
|
|
JPM
Letter
|
6.7
|
|
Losses
|
9.2
|
|
Marks
|
1.1
(in Intellectual Property definition)
|
|
Material
Contracts
|
5.14(a)
|
|
Material
Note Term
|
4.4(d)
|
|
Multiemployer
Plan
|
5.15(f)
|
|
Note
|
3.1
|
|
Notice
of Disagreement
|
3.3(b)
|
|
Offerees
|
7.13(a)
|
|
Personal
Property Leases
|
5.12
|
|
Proxy
Statement
|
7.2(a)
|
|
Purchased
Marks
|
7.12
|
|
Purchase
Price
|
3.1
|
|
Purchaser
|
Preamble
|
|
Purchaser
401(k) Plan
|
7.13(c)
|
|
Purchaser
Documents
|
6.2
|
|
Purchaser
Indemnified Parties
|
9.2
|
|
Purchaser’s
125 Plan
|
7.13(d)
|
|
Real
Property Lease
|
5.11
|
|
Real
Property Leases
|
5.11
|
|
Reimbursement
Accounts
|
7.13(d)
|
|
Representatives
|
7.4(a)
|
Term
|
Section
|
|
Restraints
|
8.1(b)
|
|
Restricted
Business
|
7.9(a)
|
|
Retained
Marks
|
7.12
|
|
Section
338(h)(10) Election
|
9.6(a)
|
|
SEC
|
7.2(a)
|
|
Securities
Act
|
6.5
|
|
Seller
Benefit Plan
|
5.15(a)
|
|
Seller
Indemnified Parties
|
9.3
|
|
Selling
Stockholder
|
Preamble
|
|
Selling
Stockholder Documents
|
5.2
|
|
Selling
Stockholder’s 125 Plan
|
7.13(d)
|
|
Shares
|
Recitals
|
|
Shareholders
Meeting
|
7.2(b)
|
|
Superior
Proposal
|
7.4(d)
|
|
Termination
Date
|
4.2(a)
|
|
Termination
Fee
|
4.5
|
|
Termination
Waiting Period
|
4.2(h)
|
|
Theatre
Direct
|
Recitals
|
|
Theatre
Direct Common Stock
|
5.4(a)
|
|
Third
Party Claim
|
9.4(a)
|
|
Transactions
|
2.1
|
|
Warrant
|
3.1
|
|
WARN
Act
|
5.16(d)
|
HOLLYWOOD
MEDIA CORP.
|
|
By:
|
/s/ Mitchell Rubenstein
|
Name: Mitchell
Rubenstein
|
|
Title:
Chairman and CEO
|
|
KEY
BRAND ENTERTAINMENT INC.
|
|
By:
|
/s/ John Gore
|
Name: John
Gore
|
|
Title:
Chief Executive Officer
|
HOLLYWOOD
MEDIA CORP.
|
||||
By:
|
/s/ Mitchell Rubenstein
|
|||
Name:
|
Mitchell
Rubenstein
|
|||
Title:
|
Chairman
and CEO
|
|||
KEY
BRAND ENTERTAINMENT INC.
|
||||
By:
|
/s/ David B. Stern
|
|||
Name:
|
David
B. Stern
|
|||
Title:
|
Secretary
|
HOLLYWOOD
MEDIA CORP.
|
||||
By:
|
/s/ Mitchell Rubenstein
|
|||
Name:
|
Mitchell
Rubenstein
|
|||
Title:
|
Chairman
and CEO
|
|||
KEY
BRAND ENTERTAINMENT INC.
|
||||
By:
|
/s/ David
B. Stern
|
|||
Name:
|
David
B. Stern
|
|||
Title:
|
Secretary
|
HOLLYWOOD
MEDIA CORP.
|
||
By:
|
/s/ Scott Gomez | |
Name:
Scott Gomez
|
||
Title:
CAO
|
||
KEY
BRAND ENTERTAINMENT INC.
|
||
By:
|
/s/ Liam Lynch | |
Name:
Liam Lynch
|
||
Title:
Chief Financial Officer
|
Borrower:
|
Key
Brand Entertainment Inc. (the “ Borrower ”).
|
Lender:
|
Hollywood
Media Corp. (the “ Lender ”).
|
Agent:
|
JPMorgan
Chase Bank, N.A. (the “ Agent ”).
|
Credit
Agreement:
|
That
certain Credit, Security, Pledge and Guaranty Agreement, dated as of
January 23, 2008, by and among, inter alios , the
Borrower, Toronto Theater Ltd., the guarantors and lenders named therein,
and the Agent, as amended by that Amendment No. 1 to Credit Agreement,
dated as of August 22, 2008 (the “ Credit
Agreement
”).
|
Second
Lien Facilities:
|
A
second lien facility to be entered into among the Borrower, Theatre Direct
NY, Inc. (the “ Company ”), the
Lender and the Agent in connection with the closing of the Transactions
(the “ Second Lien Facilities
”).
|
Second
Lien Note:
|
The
promissory note to be delivered in connection with the closing of the
Second Lien Facilities (the “ Note ”).
|
Principal
Amount:
|
$8,500,000,
subject to reduction as set forth in the following paragraph.
|
Adverse
Ticketing
Regulations:
|
The
principal amount of the Second Lien Facilities and the Note shall be
subject to reduction by up to $5,000,000 upon any adverse change in state
or federal ticketing regulations that takes effect within two years of the
Closing Date that restricts or limits the amount of services fees that may
be charged on the resale of tickets (“ Adverse Ticketing
Regulations ”), the actual amount of any such reduction to be
determined by a valuation firm mutually acceptable to Lender and Borrower.
Any
reduction of the principal amount of the Second Lien Facilities and the
Note shall be added to the Earnout Amount as follows: (i) if no Earnout
Amount has been earned, 50% of such reduction shall be added to the Level
1 Earnout Amount (as the Level 1 Regulatory Earnout Amount) and 50% of
such reduction shall be added to the Level 2 Earnout Amount (as the Level
2 Regulatory Earnout Amount); and (ii) if the Level 1 Earnout Amount
has been earned and the Level 2 Earnout Amount has not been earned, then
100% of such reduction shall be added to the Level 2 Earnout Amount (as
the Level 2 Regulatory Earnout Amount); provided, however, if the entire
Earnout Amount has been earned, there will be no such reduction in the
Note for such Adverse Ticketing Regulation.
|
Interest
Rate:
|
12%
per annum, payable in quarterly in cash.
|
Maturity:
|
The
Note will be payable in full upon on the fifth anniversary of the Closing
Date.
|
Mandatory
Prepayment:
|
The
Second Lien Facilities and the Note will accelerate and become immediately
due and payable upon any event of default (to be defined in a manner
consistent with the definition of Events of Default in the Credit
Agreement, but excluding as an Event of Default any Change in Management
(as defined in the Credit Agreement)) or a change in control (to be
defined in a manner consistent with the definition of Change in Control in
the Credit Agreement and which shall also include any sale, transfer,
disposition or change in control of the Company).
|
Voluntary
Prepayment:
|
Subject
to the terms of the Credit Agreement and the Intercreditor Agreement (as
defined below), the obligations under the Second Lien Facility and the
Note may be voluntarily prepaid in whole or in part in minimum amounts of
no less than $25,000.
|
Ranking:
|
The
obligations under the Second Lien Facilities and the Note will be
subordinated to up to $15,000,000 in the aggregate of senior indebtedness
(plus all interest accrued thereon from and after the Closing Date),
including amounts outstanding under the Credit Agreement or any renewal or
replacement thereof.
|
Security:
|
The
obligations under the Second Lien Facilities and the Note will be secured
on a second priority basis by (i) a perfected pledge of the capital
stock of the Company and each direct or indirect subsidiary of the Company
(subject, in the case of any foreign direct subsidiary, to a pledge of 65%
of the capital stock of such foreign subsidiary) and (ii) perfected
security interests in substantially all tangible and intangible assets of
the Company and each direct or indirect US domestic subsidiary of the
Company (including equipment, investment property, intellectual property,
other general intangibles, real property and proceeds of the foregoing),
which shall include a mortgage on any owned real estate but not leased
real estate.
|
Facilities
Documentation
and
Intercreditor
Agreement:
|
The
Second Lien Facilities shall be documented pursuant to a loan agreement,
security documents and other ancillary documents containing terms and
conditions (including representations, warranties, affirmative covenants,
negative covenants and events of default) which are substantially the same
as those set forth for the Credit Agreement except (i) as otherwise
set forth herein, (ii) the Second Lien Facilities shall not contain any
financial ratio covenants, (iii) for differences necessary or
customary to reflect the relative ranking of the Credit Agreement and the
Second Lien Facilities, (iv) that no representations and warranties shall
be given covering any period prior to the Closing Date with respect to the
Company or any of its subsidiaries and (v) events of default shall not
include any Change in Management.
An
intercreditor agreement (the “ Intercreditor
Agreement ”) shall be executed between the Lender, the Borrower and
the Agent, which shall contain market standard provisions as between first
lien and second lien facilities and any other conditions required by Agent
and agreed to by the Lender, including (i) permitted enforcement by the
Lenders under the Second Lien Facility after a standstill period to be
agreed in the event of non-payment of principal or interest, and a
standstill period to be agreed in the case of a breach of any other
provisions; (ii) a payment blockage period to be agreed, (iii) a provision
which permits Lender to file Lender's claim in any bankruptcy of Borrower
and vote Lender's claim, (iv) a provision which will require Agent not to
disproportionately foreclose on the collateral for the Note as compared to
the other assets which are collateral under Credit Agreement, and (v) a
provision which permits Borrower to make mandatory payments of principal
and interest on the Note (other than upon on acceleration due to an event
of default) when there is no event of default under the Credit Agreement.
|
Refinancing
or
Replacement
of the
Credit
Agreement:
|
The
loans under the Credit Agreement may be refinanced or replaced by the
Borrower so long as any intercreditor agreement to be agreed with the new
senior lender does not contain provisions which are adverse to Lender
(including with respect to ranking as set forth above) as compared to the
provisions of the Intercreditor Agreement with Agent then in effect with
respect to the Credit Agreement.
|
Assignments
and
Participations:
|
No
assignments or transfers by the Borrower or the Company. The
Lender may assign or transfer participations in the Second Lien Facilities
without restriction, except prior to any assignment or transfer of
participations Borrower shall have the right to purchase the
participations for a price equal to 102.5% of the amount offered for such
participations by the proposed purchaser thereof.
|
Governing
Law and
Forum:
|
New
York.
|
THEATRE
DIRECT NY, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
HOLLYWOOD
MEDIA CORP.
|
|
By:
|
|
Name:
|
|
Title:
|
Holder:
|
|
By:
|
|
Name:
|
1.
|
Escrow
Property
|
|
The
foregoing property and/or funds, plus all interest, dividends and other
distributions and payments thereon (collectively the "Distributions")
received by Escrow Agent, less any property and/or funds distributed or
paid in accordance with this Escrow Agreement, are collectively referred
to herein as "Escrow Property."
|
2.
|
Investment of Escrow
Property Depositors are to select one of the following
options:
|
____
|
(a)
|
Escrow
Agent shall have no obligation to pay interest on or to invest or reinvest
any Escrow Property deposited or received
hereunder.
|
|
X__
|
(b)
|
Upon
written directions from the Depositors, the Escrow Agent shall invest or
reinvest Escrow Property without distinction between principal and income,
in the following:
|
3.
|
Distribution of Escrow
Property
|
4.
|
Addresses
|
|
Notices,
instructions and other communications shall be sent to Escrow Agent,
Corporate Trust Administration, 101 Barclay Street-Floor 8W, New York, New
York 10286, Attn.: Insurance Trust and Escrow Group or Odell.Romeo@BNYMellon.com and to Depositors
as follows:
|
5.
|
Compensation
|
|
(a)
|
Depositors
shall pay Escrow Agent an annual fee of $6,000, payable upon execution of
this Agreement and thereafter on each anniversary date of this Agreement.
The annual fee shall not be pro-rated for any portion of a
year.
|
|
(b)
|
Depositors
shall pay all activity charges as per Escrow Agent’s fee schedule attached
hereto as Exhibit A.
|
|
(c)
|
Depositors
shall be responsible for and shall reimburse Escrow Agent upon demand for
all expenses, disbursements and advances incurred or made by Escrow Agent
in connection with this Agreement.
|
1.
|
The
duties, responsibilities and obligations of Escrow Agent shall be limited
to those expressly set forth herein and no duties, responsibilities or
obligations shall be inferred or implied. Escrow Agent shall
not be subject to, nor required to comply with, any other agreement
between or among any or all of the Depositors or to which any Depositor is
a party, even though reference thereto may be made herein, or to comply
with any direction or instruction (other than those contained herein or
delivered in accordance with this Escrow Agreement) from any Depositor or
any entity acting on its behalf. Escrow Agent shall not be
required to, and shall not, expend or risk any of its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder.
|
2.
|
This
Agreement is for the exclusive benefit of the parties hereto and their
respective successors hereunder, and shall not be deemed to give, either
express or implied, any legal or equitable right, remedy, or claim to any
other entity or person whatsoever.
|
3.
|
If
at any time Escrow Agent is served with any judicial or administrative
order, judgment, decree, writ or other form of judicial or administrative
process which in any way affects Escrow Property (including but not
limited to orders of attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of Escrow Property), Escrow
Agent is authorized to comply therewith in any manner as it or its legal
counsel of its own choosing deems appropriate; and if Escrow Agent
complies with any such judicial or administrative order, judgment, decree,
writ or other form of judicial or administrative process, Escrow Agent
shall not be liable to any of the parties hereto or to any other person or
entity even though such order, judgment, decree, writ or process may be
subsequently modified or vacated or otherwise determined to have been
without legal force or effect.
|
4.
|
(a)
Escrow Agent shall not be liable for any action taken or omitted or for
any loss or injury resulting from its actions or its performance or lack
of performance of its duties hereunder in the absence of fraud, gross
negligence or willful misconduct on its part. In the absence of
fraud, gross negligence and willful misconduct on its part, the Escrow
Agent shall not be liable (i) for acting in accordance with or relying
upon any instruction, notice, demand, certificate or document from any
Depositor or any entity acting on behalf of any Depositor, (ii) for any
consequential, punitive or special damages, (iii) for the acts or
omissions of its nominees, correspondents, designees, subagents or
subcustodians, or (iv) for an amount in excess of the value of the Escrow
Property, valued as of the date of
deposit.
|
|
(b)
If any fees, expenses or costs incurred by, or any obligations owed to,
Escrow Agent hereunder are not promptly paid when due, Escrow Agent may
reimburse itself therefor from the Escrow Property. As security
for the due and punctual performance of any and all of Depositors'
obligations to Escrow Agent hereunder, now or hereafter arising,
Depositors, individually and collectively, hereby pledge, assign and grant
to Escrow Agent a continuing security interest in, and a lien on, the
Escrow Property and all Distributions thereon or additions thereto
(whether such additions are the result of deposits by Depositors or the
investment of Escrow Property). The security interest of Escrow
Agent shall at all times be valid, perfected and enforceable by Escrow
Agent against Depositors and all third parties in accordance with the
terms of this Escrow Agreement.
|
|
(c)
Escrow Agent may consult with legal counsel at the expense of the
Depositors as to any matter relating to this Escrow Agreement, and Escrow
Agent shall not incur any liability in acting in good faith in accordance
with any advice from such counsel.
|
|
(d)
Escrow Agent shall not incur any liability for not performing any act or
fulfilling any duty, obligation or responsibility hereunder by reason of
any occurrence beyond the control of Escrow Agent (including but not
limited to any act or provision of any present or future law or regulation
or governmental authority, any act of God or war, or the unavailability of
the Federal Reserve Bank wire or telex or other wire or communication
facility).
|
5.
|
Unless
otherwise specifically set forth herein, Escrow Agent shall proceed as
soon as practicable to collect any checks or other collection items at any
time deposited hereunder. All such collections shall be subject
to Escrow Agent's usual collection practices or terms regarding items
received by Escrow Agent for deposit or collection. Escrow
Agent shall not be required, or have any duty, to notify anyone of any
payment or maturity under the terms of any instrument deposited hereunder,
nor to take any legal action to enforce payment of any check, note or
security deposited hereunder or to exercise any right or privilege which
may be afforded to the holder of any such
security.
|
6.
|
Escrow
Agent shall provide to Depositors monthly statements identifying
transactions, transfers or holdings of Escrow Property and each such
statement shall be deemed to be correct and final upon receipt thereof by
the Depositors unless Escrow Agent is notified in writing to the contrary
within thirty (30) business days of the date of such
statement.
|
7.
|
Escrow
Agent shall not be responsible in any respect for the form, execution,
validity, value or genuineness of documents or securities deposited
hereunder, or for any description therein, or for the identity, authority
or rights of persons executing or delivering or purporting to execute or
deliver any such document, security or
endorsement.
|
8.
|
Notices,
instructions or other communications shall be in writing and shall be
given to the address set forth in the "Addresses" provision herein (or to
such other address as may be substituted therefor by written notification
to Escrow Agent or Depositors). Notices to Escrow Agent shall
be deemed to be given when actually received by Escrow Agent's Insurance
Trust and Escrow Unit of the Corporate
Trust Division. Escrow Agent is authorized to comply with and
rely upon any notices, instructions or other communications believed by it
to have been sent or given by Depositors or by a person or persons
authorized by Depositors. Whenever under the terms hereof the
time for giving a notice or performing an act falls upon a Saturday,
Sunday, or banking holiday, such time shall be extended to the next day on
which Escrow Agent is open for
business.
|
9.
|
Depositors,
jointly and severally, shall be liable for and shall reimburse and
indemnify Escrow Agent and hold Escrow Agent harmless from and against any
and all claims, losses, liabilities, costs, damages or expenses (including
reasonable attorneys' fees and expenses) (collectively, "Losses") arising
from or in connection with or related to this Escrow Agreement or being
Escrow Agent hereunder, including, but not limited to, (i)Losses incurred
by Escrow Agent in connection with its successful defense, in whole or in
part, of any claim of gross negligence or willful misconduct on its part
or (ii) Losses incurred or sustained by the Escrow Agent as a result of or
in connection with the Escrow Agent’s reliance upon and compliance with
instructions or directions given by facsimile or electronic transmission;
provided, however, that nothing contained herein shall require Escrow
Agent to be indemnified for Losses caused by its fraud, gross negligence
or willful misconduct, it being understood that the failure of the Escrow
Agent to verify or confirm that the person giving the instructions or
directions, is, in fact, an authorized person does not constitute gross
negligence or willful misconduct.
|
10.
|
(a)
Depositors may remove Escrow Agent at any time by giving to Escrow Agent
thirty (30) calendar days' prior notice in writing signed by all
Depositors. Escrow Agent may resign at any time by giving
thirty (30)calendar days' prior written notice
thereof.
|
|
(b)
Within ten (10) calendar days after giving the foregoing notice of removal
to Escrow Agent or receiving the foregoing notice of resignation from
Escrow Agent, all Depositors shall jointly agree on and appoint a
successor Escrow Agent. If a successor Escrow Agent has not
accepted such appointment by the end of such 10-day period, Escrow Agent
may, in its sole discretion, apply to a court of competent jurisdiction
for the appointment of a successor Escrow Agent or for other appropriate
relief. The costs and expenses (including reasonable attorneys'
fees and expenses) incurred by Escrow Agent in connection with such
proceeding shall be paid by, and be deemed a joint and several obligation
of, the Depositors.
|
|
(c)
Upon receipt of the identity of the successor Escrow Agent, Escrow Agent
shall either deliver the Escrow Property then held hereunder to the
successor Escrow Agent, less Escrow Agent's fees, costs and expenses or
other obligations owed to Escrow Agent, or hold such Escrow Property (or
any portion thereof), pending distribution, until all such fees, costs and
expenses or other obligations are
paid.
|
|
(d)
Upon delivery of the Escrow Property to successor Escrow Agent, Escrow
Agent shall have no further duties, responsibilities or obligations
hereunder.
|
11.
|
(a)
In the event of any ambiguity or uncertainty hereunder or in any notice,
instruction or other communication received by Escrow Agent hereunder,
Escrow Agent may, in its sole discretion, refrain from taking any action
other than retain possession of the Escrow Property, unless Escrow Agent
receives written instructions, signed by all Depositors, which eliminates
such ambiguity or uncertainty.
|
|
(b)
In the event of any dispute between or conflicting claims by or among the
Depositors and/or any other person or entity with respect to any Escrow
Property, Escrow Agent shall be entitled, in its sole discretion, to
refuse to comply with any and all claims, demands or instructions with
respect to such Escrow Property so long as such dispute or conflict shall
continue, and Escrow Agent shall not be or become liable in any way to the
Depositors for failure or refusal to comply with such conflicting claims,
demands or instructions. Escrow Agent shall be entitled to
refuse to act until, in its sole discretion, either (i) such conflicting
or adverse claims or demands shall have been determined by a final order,
judgment or decree of a court of competent jurisdiction, which order,
judgment or decree is not subject to appeal, or settled by agreement
between the conflicting parties as evidenced in a writing satisfactory to
Escrow Agent or (ii) Escrow Agent shall have received security or an
indemnity satisfactory to it sufficient to hold it harmless from and
against any and all Losses which it may incur by reason of so
acting. Escrow Agent may, in addition, elect, in its sole
discretion, to commence an interpleader action or seek other judicial
relief or orders as it may deem, in its sole discretion,
necessary. The costs and expenses (including reasonable
attorneys' fees and expenses) incurred in connection with such proceeding
shall be paid by, and shall be deemed a joint and several obligation of,
the Depositors.
|
12.
|
This
Agreement shall be interpreted, construed, enforced and administered in
accordance with the internal substantive laws (and not the choice of law
rules) of the State of New York. Each of the Depositors hereby
submits to the personal jurisdiction of and each agrees that all
proceedings relating hereto shall be brought in courts located within the
City and State of New York or elsewhere as Escrow Agent may
select. Each of the Depositors hereby waives the right to trial
by jury and to assert counterclaims in any such proceedings. To
the extent that in any jurisdiction any Depositor may be entitled to
claim, for itself or its assets, immunity from suit, execution, attachment
(whether before or after judgment) or other legal process, each hereby
irrevocably agrees not to claim, and hereby waives, such
immunity. Each Depositor waives personal service of process and
consents to service of process by certified or registered mail, return
receipt requested, directed to it at the address last specified for
notices hereunder, and such service shall be deemed completed ten (10)
calendar days after the same is so
mailed.
|
13.
|
Except
as otherwise permitted herein, this Escrow Agreement may be modified only
by a written amendment signed by all the parties hereto, and no waiver of
any provision hereof shall be effective unless expressed in a writing
signed by the party to be charged.
|
14.
|
The
rights and remedies conferred upon the parties hereto shall be cumulative,
and the exercise or waiver of any such right or remedy shall not preclude
or inhibit the exercise of any additional rights or
remedies. The waiver of any right or remedy hereunder shall not
preclude the subsequent exercise of such right or
remedy.
|
15.
|
Each
Depositor hereby represents and warrants (a) that this Escrow Agreement
has been duly authorized, executed and delivered on its behalf and
constitutes its legal, valid and binding obligation and (b) that the
execution, delivery and performance of this Escrow Agreement by Depositor
do not and will not violate any applicable law or
regulation.
|
16.
|
The
invalidity, illegality or unenforceability of any provision of this
Agreement shall in no way affect the validity, legality or enforceability
of any other provision; and if any provision is held to be enforceable as
a matter of law, the other provisions shall not be affected thereby and
shall remain in full force and
effect.
|
17.
|
This
Agreement shall constitute the entire agreement of the parties with
respect to the subject matter and supersedes all prior oral or written
agreements in regard thereto.
|
18.
|
This
Agreement shall terminate upon the distribution of all Escrow Property
from the Account. The provisions of these Terms and Conditions
shall survive termination of this Escrow Agreement and/or the resignation
or removal of the Escrow Agent.
|
19.
|
No
printed or other material in any language, including prospectuses,
notices, reports, and promotional material which mentions "The Bank of New
York Mellon" by name or the rights, powers, or duties of the Escrow Agent
under this Agreement shall be issued by any other parties hereto, or on
such party's behalf, without the prior written consent of Escrow
Agent.
|
20.
|
The
headings contained in this Agreement are for convenience of reference only
and shall have no effect on the interpretation or operation
hereof.
|
21.
|
This
Escrow Agreement may be executed by each of the parties hereto in any
number of counterparts, each of which counterpart, when so executed and
delivered, shall be deemed to be an original and all such counterparts
shall together constitute one and the same
agreement.
|
22.
|
The
Escrow Agent does not have any interest in the Escrowed Property deposited
hereunder but is serving as escrow holder only and having only possession
thereof. If Closing does not occur prior to December 31, 2009, KBE shall
be deemed the owner of the Escrow Property for tax purposes, and KBE will
be required to report its earnings as reported by the Escrow Agent. The
Escrow Agent shall release an amount equal to _40% of the earnings within
thirty (30) days of the end of each calendar year to KBE in order to pay
taxes on such earnings. KBE shall indemnify and hold harmless
the Escrow Agent for any amounts that it is obligated to pay in the way of
such taxes; provided, however, that if the Escrow Property is disbursed to
a Depositor, then the earnings included in such disbursement shall be
allocated to such Depositor for tax purposes and such Depositor shall
indemnify and hold harmless the Escrow Agent for any amounts that it is
obligated to pay in the way of such taxes. Any payments of
income from this Escrow Account shall be subject to withholding
regulations then in force with respect to United States
taxes. The parties hereto will provide the Escrow Agent with
appropriate W-9 forms for tax I.D., number certifications, or W-8 forms
for non-resident alien certifications. It is understood that
the Escrow Agent shall be responsible for income reporting only with
respect to income earned on investment of funds which are a part of the
Escrowed Property and is not responsible for any other
reporting. This paragraph and paragraph (9) shall survive
notwithstanding any termination of this Escrow Agreement or the
resignation of the Escrow Agent.
|
23.
|
Notwithstanding
anything to the contrary contained herein, in all circumstances under
which Depositors are jointly or jointly and severally obligated to make
payments to Escrow Agent, which includes all compensation under Section
I.5 above, as between the Depositors, such payments shall be borne fifty
percent (50%) by each Depositor and to the extent Depositor fails to make
such payment any right it has to receive distributions of the Escrow
Property hereunder shall be reduced
accordingly.
|
Hollywood Media Corp. | Key Brand Entertainment Inc. | ||||
By: |
/s/
Mitchell Rubenstein
|
By: |
/s/
John Gore
|
||
Name: |
Mitchell
Rubenstein
|
Name: |
John
Gore
|
||
Title: |
Chairman
and CEO
|
Title: |
John
Gore
|
THE BANK OF NEW YORK MELLON, as Escrow Agent | |||
By: |
/s/
Odell Romeo
|
||
Name: |
Odell
Romeo
|
||
Title: |
Vice
President
|
Very
truly yours,
|
![]() |
PETER
J. SOLOMON COMPANY L.P.
|
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 11,764,810 | $ | 12,685,946 | ||||
Receivables,
net
|
897,503 | 1,433,797 | ||||||
Inventories
held for sale
|
3,735,691 | 4,491,841 | ||||||
Deferred
ticket costs
|
10,985,160 | 12,085,237 | ||||||
Prepaid
expenses
|
1,896,237 | 1,418,563 | ||||||
Other
receivables
|
1,125,263 | 1,287,752 | ||||||
Other
current assets
|
436,675 | 99,945 | ||||||
Related
party receivable
|
335,245 | 143,464 | ||||||
Restricted
cash
|
1,221,000 | 2,600,000 | ||||||
Total
current assets
|
32,397,584 | 36,246,545 | ||||||
PROPERTY
AND EQUIPMENT, net
|
4,369,085 | 4,649,202 | ||||||
INVESTMENTS
IN AND ADVANCES TO UNCONSOLIDATED INVESTEES
|
230,097 | 132,800 | ||||||
INTANGIBLE
ASSETS, net
|
390,818 | 682,896 | ||||||
GOODWILL
|
20,197,513 | 25,154,292 | ||||||
OTHER
ASSETS
|
21,082 | 73,126 | ||||||
TOTAL
ASSETS
|
$ | 57,606,179 | $ | 66,938,861 | ||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 1,632,351 | $ | 1,329,949 | ||||
Accrued
expenses and other
|
3,074,549 | 3,708,652 | ||||||
Deferred
revenue
|
14,012,178 | 15,196,455 | ||||||
Gift
certificate liability
|
3,794,899 | 3,434,359 | ||||||
Customer
deposits
|
948,273 | 831,838 | ||||||
Current
portion of capital lease obligations
|
123,061 | 203,579 | ||||||
Current
portion of notes payable
|
37,454 | 43,147 | ||||||
Related
party payable
|
- | 2,622,438 | ||||||
Total
current liabilities
|
23,622,765 | 27,370,417 | ||||||
DEFERRED
REVENUE
|
309,190 | 401,309 | ||||||
CAPITAL
LEASE OBLIGATIONS, less current portion
|
75,830 | 203,901 | ||||||
OTHER
DEFERRED LIABILITY
|
1,105,553 | 1,168,096 | ||||||
NOTES
PAYABLE, less current portion
|
2,432 | 36,258 | ||||||
COMMITMENTS
AND CONTINGENCES
|
||||||||
SHAREHOLDERS’
EQUITY
|
||||||||
Preferred
stock, $.01 par value, 1,000,000 shares authorized; none outstanding
|
- | - | ||||||
Common
stock, $.01 par value, 100,000,000 shares authorized; 31,037,656 and
|
||||||||
30,883,913
shares issued and outstanding at December 31, 2009 and
|
||||||||
December
31, 2008, respectively
|
310,377 | 308,839 | ||||||
Additional
paid-in capital
|
309,480,331 | 309,100,760 | ||||||
Accumulated
deficit
|
(277,315,848 | ) | (271,695,431 | ) | ||||
Total
Hollywood Media Corp. shareholders’ equity
|
32,474,860 | 37,714,168 | ||||||
Non-controlling
interest
|
15,549 | 44,712 | ||||||
Total
shareholders’ equity
|
32,490,409 | 37,758,880 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 57,606,179 | $ | 66,938,861 |
YEAR ENDED DECEMBER 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
NET
REVENUES
|
||||||||||||
Ticketing
|
$ | 98,860,362 | $ | 110,918,969 | $ | 111,792,068 | ||||||
Other
|
4,518,548 | 6,138,962 | 6,369,156 | |||||||||
103,378,910 | 117,057,931 | 118,161,224 | ||||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||
Cost
of revenues - ticketing
|
81,014,536 | 92,882,066 | 94,017,924 | |||||||||
Editorial,
production, development and technology
|
2,569,354 | 3,323,546 | 3,590,192 | |||||||||
Selling,
general and administrative
|
10,827,719 | 13,932,852 | 14,269,974 | |||||||||
Payroll
and benefits
|
10,574,375 | 13,284,857 | 13,368,817 | |||||||||
Impairment
loss
|
- | 3,524,697 | - | |||||||||
Depreciation
and amortization
|
1,590,598 | 2,224,831 | 1,378,492 | |||||||||
Total
operating costs and expenses
|
106,576,582 | 129,172,849 | 126,625,399 | |||||||||
Loss
from operations
|
(3,197,672 | ) | (12,114,918 | ) | (8,464,175 | ) | ||||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||||||
Equity
in earnings of unconsolidated investees
|
2,006,498 | 1,160,623 | 4,747 | |||||||||
Impairment
loss
|
(5,000,000 | ) | - | - | ||||||||
Total
equity in earnings (losses) of unconsolidated investees
|
(2,993,502 | ) | 1,160,623 | 4,747 | ||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||
Interest,
net
|
28,922 | 425,251 | 199,437 | |||||||||
Other,
net
|
(75,146 | ) | 44,958 | (50,935 | ) | |||||||
Loss
from continuing operations
|
(6,237,398 | ) | (10,484,086 | ) | (8,310,926 | ) | ||||||
Gain
(loss) on sale of discontinued operations, net of income taxes
|
614,572 | (4,655,122 | ) | 10,254,287 | ||||||||
Loss
from discontinued operations
|
- | (1,635,750 | ) | (211,993 | ) | |||||||
Income
(loss) from discontinued operations
|
614,572 | (6,290,872 | ) | 10,042,294 | ||||||||
Net
income (loss)
|
(5,622,826 | ) | (16,774,958 | ) | 1,731,368 | |||||||
NET
(INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING
|
2,409 | (81,365 | ) | 3,241 | ||||||||
INTEREST
|
||||||||||||
Net
income (loss) attributable to Hollywood Media Corp.
|
$ | (5,620,417 | ) | $ | (16,856,323 | ) | $ | 1,734,609 | ||||
Basic
and diluted income (loss) per common share
|
||||||||||||
Continuing
operations
|
$ | (0.20 | ) | $ | (0.33 | ) | $ | (0.25 | ) | |||
Discontinued
operations
|
0.02 | (0.20 | ) | 0.30 | ||||||||
Total
basic and diluted net income (loss) per share
|
$ | (0.18 | ) | $ | (0.53 | ) | $ | 0.05 | ||||
Weighted
average common and common equivalent shares
|
||||||||||||
outstanding
– basic and diluted
|
30,584,902 | 31,793,853 | 33,303,886 |
Common Stock
|
Additional
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Paid-in Capital
|
Deficit
|
Total
|
||||||||||||||||
Balance
– December 31, 2006
|
33,476,530 | $ | 334,765 | $ | 311,210,796 | $ | (255,846,144 | ) | $ | 55,699,417 | ||||||||||
Effect
of adoption of FSP EITF 00-19-2
|
- | - | 2,151,037 | (727,573 | ) | 1,423,464 | ||||||||||||||
Repurchase
of company stock
|
(2,003,660 | ) | (20,037 | ) | (5,084,167 | ) | - | (5,104,204 | ) | |||||||||||
Issuance
of stock – stock option exercises
|
69,375 | 694 | 203,130 | - | 203,824 | |||||||||||||||
Issuance
of stock to employees
|
145,308 | 1,453 | 570,806 | - | 572,259 | |||||||||||||||
Issuance
of stock – warrant exercise
|
149,181 | 1,492 | (1,492 | ) | - | - | ||||||||||||||
Issuance
of stock – 401(k) employer match
|
59,257 | 593 | 248,283 | - | 248,876 | |||||||||||||||
Amortization
of deferred compensation
|
- | - | 650,000 | - | 650,000 | |||||||||||||||
Issuance
of stock for acquisitions of intangible
|
||||||||||||||||||||
assets
|
1,992 | 20 | 7,980 | - | 8,000 | |||||||||||||||
Compensation
expense on employee stock options
|
- | - | 164,158 | - | 164,158 | |||||||||||||||
Net
income
|
- | - | - | 1,734,609 | 1,734,609 | |||||||||||||||
Balance
– December 31, 2007
|
31,897,983 | 318,980 | 310,120,531 | (254,839,108 | ) | 55,600,403 | ||||||||||||||
Repurchase
of company stock
|
(1,711,639 | ) | (17,117 | ) | (2,107,882 | ) | - | (2,124,999 | ) | |||||||||||
Issuance
of stock – stock option exercises
|
101,000 | 1,010 | 121,890 | - | 122,900 | |||||||||||||||
Issuance
of stock to officers
|
100,000 | 1,000 | 101,000 | - | 102,000 | |||||||||||||||
Issuance
of warrants for services rendered
|
- | - | 4,429 | - | 4,429 | |||||||||||||||
Issuance
of stock – 401(k) employer match
|
96,569 | 966 | 279,084 | - | 280,050 | |||||||||||||||
Amortization
of deferred compensation
|
- | - | 487,500 | - | 487,500 | |||||||||||||||
Issuance
of restricted stock - officers
|
400,000 | 4,000 | (3,069 | ) | - | 931 | ||||||||||||||
Compensation
expense on employee stock options
|
- | - | 97,277 | - | 97,277 | |||||||||||||||
Net
loss
|
- | - | - | (16,856,323 | ) | (16,856,323 | ) | |||||||||||||
Balance
– December 31, 2008
|
30,883,913 | 308,839 | 309,100,760 | (271,695,431 | ) | 37,714,168 | ||||||||||||||
Repurchase
of company stock
|
(71,600 | ) | (716 | ) | (72,238 | ) | - | (72,954 | ) | |||||||||||
Issuance
of stock – 401(k) employer match
|
225,343 | 2,254 | 223,089 | - | 225,343 | |||||||||||||||
Stock
compensation expense - officers
|
- | - | 204,885 | - | 204,885 | |||||||||||||||
Stock
compensation expense - employees
|
- | - | 23,835 | - | 23,835 | |||||||||||||||
Net
loss
|
- | - | - | (5,620,417 | ) | (5,620,417 | ) | |||||||||||||
Balance
– December 31, 2009
|
31,037,656 | $ | 310,377 | $ | 309,480,331 | $ | (277,315,848 | ) | $ | 32,474,860 |
YEAR ENDED DECEMBER 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
income (loss)
|
$ | (5,622,826 | ) | $ | (16,774,958 | ) | $ | 1,731,368 | ||||
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
|
||||||||||||
operating
activities:
|
||||||||||||
(Income)
loss from discontinued operations
|
(614,572 | ) | 6,290,872 | (10,042,294 | ) | |||||||
Depreciation
and amortization
|
1,590,598 | 2,224,831 | 1,378,492 | |||||||||
Amortization
of discount on senior unsecured notes
|
- | - | 624,601 | |||||||||
401(k)
stock match
|
141,664 | 165,819 | 198,753 | |||||||||
Warrants issued for consulting services
|
- | 4,429 | - | |||||||||
Equity
in earnings of unconsolidated investees, net of return of invested capital
|
(97,297 | ) | 154,185 | (4,271 | ) | |||||||
Stock
compensation expense
|
23,835 | 97,277 | 164,158 | |||||||||
Loss
(gain) on retirement of property
|
160,608 | (21,340 | ) | - | ||||||||
Stock
compensation expense - officers
|
204,885 | 102,931 | - | |||||||||
Amortization
of deferred compensation costs
|
- | 487,500 | 650,000 | |||||||||
Provision
for bad debts
|
387,362 | 319,273 | 627,197 | |||||||||
Distributions
to minority owners
|
(26,754 | ) | (3,724 | ) | (91,728 | ) | ||||||
Impairment
loss
|
5,000,000 | 3,524,697 | - | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
Receivables
|
148,932 | 280,632 | (378,620 | ) | ||||||||
Inventories
held for sale
|
756,150 | (541,263 | ) | (576,451 | ) | |||||||
Deferred
ticket costs
|
1,100,077 | 4,396,624 | (1,208,537 | ) | ||||||||
Prepaid
expenses
|
(477,674 | ) | 778,953 | (111,753 | ) | |||||||
Other
receivables
|
162,489 | 2,559,682 | (933,160 | ) | ||||||||
Related
party receivable
|
12,640 | ( 88,992 | ) | 5,193 | ||||||||
Other
current assets
|
(336,730 | ) | 529,353 | (543,764 | ) | |||||||
Other
assets
|
52,044 | (18,133 | ) | 55,685 | ||||||||
Accounts
payable
|
239,633 | (2,053,364 | ) | 697,626 | ||||||||
Accrued
expenses and other
|
(644,141 | ) | (303,440 | ) | (2,655,186 | ) | ||||||
Deferred
revenue
|
(915,856 | ) | (5,747,493 | ) | 489,412 | |||||||
Customer
deposits
|
116,435 | (1,096,519 | ) | 152,644 | ||||||||
Other
deferred liability
|
(62,543 | ) | 272,014 | 613,118 | ||||||||
Restricted
cash
|
(1,221,000 | ) | - | - | ||||||||
Net
cash provided by (used in) operating activities – continuing operations
|
77,959 | (4,460,154 | ) | (9,157,517 | ) | |||||||
Net
cash provided by (used in) operating activities - discontinued operations
|
- | (2,717,075 | ) | 1,510,881 | ||||||||
Net
cash provided by (used in) operating activities
|
77,959 | (7,177,229 | ) | (7,646,636 | ) | |||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Capital
expenditures
|
(1,190,141 | ) | (1,290,439 | ) | (3,393,426 | ) | ||||||
Acquisition
of businesses, net of cash acquired
|
- | (43,313 | ) | (2,690,659 | ) | |||||||
Proceeds
(expenditures) from sale of assets
|
472,920 | (42,320 | ) | 25,418,361 | ||||||||
Acquisition
of intangible assets
|
- | (17,000 | ) | (59,470 | ) | |||||||
Proceeds
from property and equipment sales
|
- | - | 29,432 | |||||||||
Loss
on disposition of assets
|
- | - | ( 1,722 | ) | ||||||||
Restricted
cash
|
- | - | 90,000 | |||||||||
Net
cash (used in) provided by investing activities – continuing operations
|
(717,221 | ) | (1,393,072 | ) | 19,392,516 | |||||||
Net
cash used in investing activities – discontinued operations
|
- | (3,274,868 | ) | (582,048 | ) | |||||||
Net
cash (used in) provided by investing activities
|
(717,221 | ) | (4,667,940 | ) | 18,810,468 | |||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Proceeds
received from exercise of stock options
|
- | 122,900 | 203,824 | |||||||||
Payments
under capital lease obligations
|
(169,401 | ) | (157,030 | ) | (93,290 | ) | ||||||
(Repayment
of) proceeds from notes payable
|
(39,519 | ) | (68,306 | ) | 147,711 | |||||||
Extinguishment
of unsecured notes
|
- | - | (7,000,000 | ) | ||||||||
Stock
repurchase program
|
(72,954 | ) | (2,124,999 | ) | (5,104,204 | ) | ||||||
Net
cash used in financing activities – continuing operations
|
(281,874 | ) | (2,227,435 | ) | (11,845,959 | ) | ||||||
Net
cash used in financing activities – discontinued operations
|
- | - | (7,972 | ) | ||||||||
Net
cash used in financing activities
|
(281,874 | ) | (2,227,435 | ) | (11,853,931 | ) | ||||||
Net
decrease in cash and cash equivalents
|
(921,136 | ) | (14,072,604 | ) | (690,099 | ) | ||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
12,685,946 | 26,758,550 | 27,448,649 | |||||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 11,764,810 | $ | 12,685,946 | $ | 26,758,550 | ||||||
SUPPLEMENTAL
SCHEDULE OF CASH RELATED ACTIVITIES:
|
||||||||||||
Interest
paid
|
$ | 41,607 | $ | 64,674 | $ | 268,628 | ||||||
Taxes
paid
|
$ | 19,345 | $ | 462,837 | $ | 787,086 |
Additions (Deductions)
|
||||||||||||||||||||||
Balance at
|
Charges to
|
Charged
|
Balance at
|
|||||||||||||||||||
Beginning
|
costs and
|
to other
|
end of
|
|||||||||||||||||||
of period
|
expenses
|
accounts
|
Write-offs
|
period
|
||||||||||||||||||
Allowance
for doubtful
accounts:
|
||||||||||||||||||||||
2009
|
$ | 645,177 | $ | 141,310 | - | $ | (312,801 | ) |
(B)
|
$ | 473,686 | |||||||||||
2008
|
$ | 1,146,536 | $ | 319,273 | $ | 5,000 |
(A)
|
$ | (825,632 | ) |
(B)
|
$ | 645,177 | |||||||||
2007
|
$ | 1,144,700 | $ | 627,197 | $ | 48,360 |
(A)
|
$ | (673,721 | ) |
(B)
|
$ | 1,146,536 |
Notes:
|
(A)
Collections on accounts previously written off and acquisitions of
subsidiaries.
|
Furniture
and fixtures
|
5
years
|
Equipment
and software
|
3
to 5 years
|
Website
development
|
Up
to 3 years
|
Equipment
under capital leases
|
Shorter
of term of lease or 3 to 5 years
|
Leasehold
improvements
|
Term
of lease
|
Internally
developed software
|
3
years upon implementation
|
Stock Options
|
Warrants
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Exercise
|
Exercise
|
|||||||||||||||
Shares
|
Price
|
Shares
|
Price
|
|||||||||||||
Outstanding
at December 31, 2008
|
591,943 | $ | 5.24 | 1,989,985 | $ | 4.35 | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Cancelled
|
(1,000 | ) | 4.28 | - | - | |||||||||||
Expired
|
(70,000 | ) | 11.73 | (1,182,485 | ) | 4.41 | ||||||||||
Outstanding
at December 31, 2009
|
520,943 | $ | 4.37 | 807,500 | $ | 4.27 |
Number of
|
Exercise Price
|
||||||
Shares
|
Per Share
|
||||||
Outstanding
at December 31, 2008
|
591,943 |
$
2.03 - $16.50
|
|||||
Granted
|
- |
-
|
|||||
Exercised
|
- |
-
|
|||||
Cancelled
|
(1,000 | ) |
$
4.28
|
||||
Expired
|
(70,000 | ) |
$
2.55 - $16.50
|
||||
Outstanding
at December 31, 2009
|
520,943 |
$
2.03 - $9.75
|
Weighted
|
||||||||||||||||
Average
|
||||||||||||||||
Number of
|
Weighted
|
Remaining
|
||||||||||||||
Options
|
Average Exercise
|
Contractual
|
Aggregate
|
|||||||||||||
Outstanding
|
Price Per Share
|
Term (years)
|
Intrinsic Value (1)
|
|||||||||||||
Vested
Options
|
517,193 | $ | 4.37 | 3.04 | $ | - | ||||||||||
Non-vested
Options
|
3,750 | $ | 4.19 | 1.77 | - | |||||||||||
Total
Outstanding Stock Options
|
520,943 | $ | - |
(1)
|
The
aggregate intrinsic value is computed based on the closing price of
Hollywood Media’s stock on December 31, 2009, which is a
price per share of $1.40.
|
Weighted -
|
||||||||
Average Grant
|
||||||||
Number of
|
Date Fair Value
|
|||||||
Shares
|
Per Share
|
|||||||
Non-vested
at December 31, 2008
|
7,500 | $ | 2.42 | |||||
Granted
|
- | - | ||||||
Vested
|
(3,750 | ) | $ | 2.32 | ||||
Forfeited
|
- | - | ||||||
Non-vested
at December 31, 2009
|
3,750 | $ | 2.39 |
2009
|
2008
|
2007
|
||||||||||
Average
risk free interest rate
|
- | - | 4.14 | % | ||||||||
Expected
lives of options (years):
|
||||||||||||
Two
year options
|
- | - | - | |||||||||
Three
year options
|
- | - | - | |||||||||
Five
and Ten year options
|
- | - | 10 | |||||||||
Expected
volatility
|
- | - | 72.1 | % |
2009
|
2008
|
2007
|
||||||||||
Exercise
Price Equals Market Price
|
||||||||||||
Weighted
average exercise price
|
$ | - | $ | 2.34 | $ | 2.50 | ||||||
Weighted
average fair value
|
$ | - | $ | 0.59 | $ | 1.99 | ||||||
Exercise
Price Exceeds Market Price
|
||||||||||||
Weighted
average exercise price
|
$ | - | $ | - | $ | - | ||||||
Weighted
average fair value
|
$ | - | $ | - | $ | - | ||||||
Exercise
Price is Less Than Market Price
|
||||||||||||
Weighted
average exercise price
|
$ | - | $ | - | $ | - | ||||||
Weighted
average fair value
|
$ | - | $ | - | $ | - |
Options and Warrants Outstanding
|
Exercisable
|
|||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Remaining
|
Exercise
|
Exercise
|
||||||||||||||||||
Range of
|
Number of
|
Contractual
|
Price
|
Number of
|
Price
|
|||||||||||||||
Exercise Prices
|
Shares
|
Life
|
Per Share
|
Shares
|
Per Share
|
|||||||||||||||
$
2.03 - $ 2.50
|
97,500 | 4.31 | $ | 2.13 | 97,500 | $ | 2.13 | |||||||||||||
$
4.06 - $ 5.19
|
1,194,943 | 1.56 | $ | 4.32 | 1,191,193 | $ | 4.32 | |||||||||||||
$9.75
|
36,000 | .41 | $ | 9.75 | 36,000 | $ | 9.75 | |||||||||||||
1,328,443 | 1.73 | $ | 4.31 | 1,324,693 | $ | 4.31 |
|
(a)
|
One-third
of the issued shares vest at the rate of 25% per year on each of the first
through fourth anniversaries of the date of grant, such that these shares
will be fully vested on the fourth anniversary of the date of grant,
assuming continued employment of the executives by Hollywood Media.
|
|
|
|
(b)
|
One-third
of the issued shares will vest if, at any time prior to the fourth
anniversary of the date of grant, Hollywood Media achieves EBITDA greater
than zero for either (A) each of two consecutive fiscal quarters or
(B) any three quarters in any 15-month period, in each case beginning
with the fourth fiscal quarter of 2008.
|
|
(c)
|
One-third
of the issued shares will vest if, at any time prior to the fourth
anniversary of the date of grant, the closing price of Hollywood Media’s
Common Stock exceeds $2.00 per share for at least 10 consecutive trading
days after the date of grant.
|
2009
|
2008
|
2007
|
||||||||||
Operating
revenue
|
$ | - | $ | 3,948,495 | $ | 4,322,810 | ||||||
Gain
(loss) on sale of discontinued operations net of
|
||||||||||||
income
taxes of $569,298 for 2007
|
614,572 | (4,655,122 | ) | 10,254,287 | ||||||||
Loss
from discontinued operations
|
- | (1,635,750 | ) | (211,993 | ) | |||||||
Income
(loss) from discontinued operations
|
$ | 614,572 | $ | (6,290,872 | ) | $ | 10,042,294 |
(5)
|
ACQUISITIONS AND OTHER
CAPITAL TRANSACTIONS:
|
Purchase
consideration (including contingent consideration recorded through
December 31, 2009)
|
$ | 2,839,194 | ||
Cash
acquired
|
4,824 | |||
Accounts
receivable
|
368,319 | |||
Prepaid
|
11,584 | |||
Intangibles
|
470,760 | |||
Total
assets
|
$ | 855,487 | ||
Current
liabilities
|
$ | (94,167 | ) | |
Total
liabilities
|
$ | (94,167 | ) | |
Net
assets
|
$ | 761,320 | ||
Excess
of the purchase consideration over fair value of net assets acquired
(included in Broadway Ticketing segment)
|
$ | 2,077,874 |
December 31, 2007
|
||||
(unaudited)
|
||||
Proforma
net revenues
|
$ | 118,897,529 | ||
Proforma
loss from continuing operations
|
$ | (8,482,476 | ) | |
Proforma
net income
|
$ | 1,716,308 | ||
Proforma
loss per share from continuing operations
|
$ | (0.25 | ) | |
Proforma
net income per share
|
$ | 0.05 | ||
Proforma
weighted average common and common equivalent shares
|
33,303,886 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Equipment
and software
|
$ | 4,691,921 | $ | 4,328,556 | ||||
Leasehold
improvements
|
2,878,332 | 2,869,874 | ||||||
Equipment
under capital leases
|
1,059,560 | 1,200,737 | ||||||
Furniture
and fixtures
|
850,704 | 860,132 | ||||||
Website
development
|
781,717 | 288,224 | ||||||
Internally
developed software project
|
||||||||
In
progress
|
591,329 | 427,398 | ||||||
10,853,563 | 9,974,921 | |||||||
Less: Accumulated
depreciation and
|
||||||||
amortization
|
(6,484,478 | ) | (5,325,719 | ) | ||||
$ | 4,369,085 | $ | 4,649,202 |
(9)
|
GOODWILL AND
INTANGIBLE ASSETS:
|
Balance at
|
Balance at
|
Balance at
|
||||||||||||||||||||||||||
December 31,
|
Acquisition
|
December 31,
|
Acquisition
|
December 31,
|
||||||||||||||||||||||||
2009
|
and Other
|
Impairment
|
2008
|
and Other
|
Impairment
|
2007
|
||||||||||||||||||||||
Broadway
Ticketing
|
$ | 5,601,730 | $ | 43,221 | $ | - | $ | 5,558,509 | $ | (370,270 | ) | $ | - | $ | 5,928,779 | |||||||||||||
Ad
Sales and Other
|
14,595,783 | - | (5,000,000 | ) | 19,595,783 | - | (3,276,640 | ) | 22,872,423 | |||||||||||||||||||
Intellectual
Properties
|
- | - | - | - | - | (248,057 | ) | 248,057 | ||||||||||||||||||||
Total
|
$ | 20,197,513 | $ | 43,221 | $ | (5,000,000 | ) | $ | 25,154,292 | $ | (370,270 | ) | $ | (3,524,697 | ) | $ | 29,049,259 |
Balance at December 31,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Gross
|
Gross
|
|||||||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Accumulated
|
|||||||||||||||||||||
Amount
|
Amortization
|
Net
|
Amount
|
Amortization
|
Net
|
|||||||||||||||||||
Patents
and trademarks
|
$ | 203,368 | $ | (183,831 | ) | $ | 19,537 | $ | 203,368 | $ | (171,843 | ) | $ | 31,525 | ||||||||||
Web
addresses
|
2,061,089 | (2,044,128 | ) | 16,961 | 2,061,089 | (1,999,604 | ) | 61,485 | ||||||||||||||||
Other
|
2,112,852 | (1,758,532 | ) | 354,320 | 2,112,852 | (1,522,966 | ) | 589,886 | ||||||||||||||||
Total
|
$ | 4,377,309 | $ | (3,986,491 | ) | $ | 390,818 | $ | 4,377,309 | $ | (3,694,413 | ) | $ | 682,896 |
Year
|
Amount
|
|||
2010
|
$ | 232,404 | ||
2011
|
90,505 | |||
2012
|
62,820 | |||
2013
|
5,089 | |||
2014
|
- | |||
Total
|
$ | 390,818 |
Year
|
Amount
|
|||
2010
|
$ | 135,715 | ||
2011
|
68,458 | |||
2012
|
11,135 | |||
2013
|
355 | |||
2014
|
- | |||
Minimum
lease payments
|
215,663 | |||
Less:
amount representing imputed interest
|
(16,772 | ) | ||
Present
value of net minimum lease payments
|
198,891 | |||
Less:
current portion
|
(123,061 | ) | ||
$ | 75,830 |
Year
|
Amount
|
|||
2018
|
$ | 5,804,864 | ||
2019
|
18,526,989 | |||
2020
|
43,159,623 | |||
2021
|
37,552,359 | |||
2022
|
76,867,212 | |||
2023
|
9,728,058 | |||
2024
|
8,719,119 | |||
2025
|
9,543,785 | |||
2028
|
10,876,436 | |||
2029
|
5,068,861 | |||
$ | 225,847,306 |
2009
|
2008
|
|||||||
Net
difference in tax basis and book basis for certain
|
||||||||
assets
and liabilities
|
$ | 324,483 | $ | 1,997,251 | ||||
Net
operating loss and tax credit carryforwards
|
86,144,320 | 84,102,705 | ||||||
86,468,803 | 86,099,956 | |||||||
Valuation
allowance
|
(86,468,803 | ) | (86,099,956 | ) | ||||
Net
deferred tax asset
|
$ | - | $ | - |
For the Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Income
tax benefit at Federal statutory tax rate
|
$ | (1,967,989 | ) | $ | (3,697,908 | ) | $ | (2,907,690 | ) | |||
State
income tax benefit (net of federal benefit)
|
(163,062 | ) | (306,398 | ) | (240,923 | ) | ||||||
Change
in valuation allowance
|
694,919 | 4,938,841 | (1,170,750 | ) | ||||||||
Change
in valuation allowance resulting from change in
|
||||||||||||
cumulative
temporary differences
|
(326,072 | ) | - | 1,943,628 | ||||||||
Impairment
of goodwill
|
1,895,000 | 1,182,315 | - | |||||||||
Dividends
received deduction
|
(580,386 | ) | (397,526 | ) | - | |||||||
Change
in cumulative temporary differences
|
- | - | (1,943,628 | ) | ||||||||
Sale
of subsidiaries – basis difference
|
326,072 | 450,206 | - | |||||||||
Non
deductible expenses
|
- | - | - | |||||||||
Loss
of foreign subsidiaries
|
- | 271,973 | 418,802 | |||||||||
Tax
effect of income (loss) from discontinued operations
|
152,351 | (2,384,240 | ) | 3,900,561 | ||||||||
Other
|
(30,833 | ) | (57,263 | ) | - | |||||||
$ | - | $ | - | $ | - |
December 31,
|
||||||||
2009
|
2008
|
|||||||
NetCo
Partners (a)
|
$ | 139,789 | $ | 137,775 | ||||
MovieTickets.com
(b)
|
90,308 | (4,975 | ) | |||||
$ | 230,097 | $ | 132,800 |
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
Revenues
|
$ | - | $ | 9,508 | $ | 1,138 | ||||||
Gross
profit
|
- | 7,416 | 887 | |||||||||
Net
income (loss)
|
(5,973 | ) | (300,954 | ) | 9,494 | |||||||
Company’s
share
|
||||||||||||
of
net income (loss)
|
$ | (2,987 | ) | $ | (150,477 | ) | $ | 4,747 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Current
assets
|
$ | 1,546 | $ | 771 | ||||
Current
liabilities
|
$ | 49,025 | $ | 48,700 |
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
Revenues
|
$ | 18,643,342 | $ | 18,062,438 | $ | 13,130,977 | ||||||
Cost
and expenses
|
$ | 13,471,941 | $ | 12,345,771 | $ | 10,045,326 | ||||||
Depreciation
and amortization
|
$ | 594,120 | $ | 502,950 | $ | 532,495 | ||||||
Net
income
|
$ | 4,842,476 | $ | 5,764,290 | $ | 3,318,818 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash
|
$ | 5,128,137 | $ | 3,183,806 | ||||
Accounts
receivable, net
|
$ | 5,822,591 | $ | 5,651,847 | ||||
Accrued
expenses and current liabilities
|
$ | 2,090,816 | $ | 3,451,147 |
Year
|
Amount
|
|||
2010
|
$ | 1,081,613 | ||
2011
|
1,087,238 | |||
2012
|
1,141,414 | |||
2013
|
865,664 | |||
2014
|
886,083 | |||
Thereafter
|
1,994,967 | |||
Total
|
$ | 7,056,979 |
(17)
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
2009
|
2008
|
2007
|
|||||||||||||||||
INVESTING
ACTIVITIES
:
|
|||||||||||||||||||
Acquisition
of property and equipment under capital leases
|
$ | - | $ | (456,587 | ) | $ | (441,026 | ) | |||||||||||
Total
non-cash investing activities
|
$ | - | $ | (456,587 | ) | $ | (441,026 | ) | |||||||||||
FINANCING ACTIVITIES
:
|
|||||||||||||||||||
Obligations
acquired under capital leases
|
$ | - | $ | 176,918 | $ | 441,026 | |||||||||||||
Common stock issued
and
vesting for compensation to
officers
|
204,885 |
(2)
|
102,931 |
(2), (3)
|
- | ||||||||||||||
Common
stock issued for contributions to Company 401(k) Plan
|
225,343 |
(1)
|
280,050 |
(4)
|
248,876 |
(5)
|
|||||||||||||
Common
stock issued as compensation as part of sale
|
- | 402,150 |
(6)
|
||||||||||||||||
Total
non-cash financing activities
|
$ | 430,228 | $ | 559,899 | $ | 1,092,052 |
|
(5) On
February 9, 2007, Hollywood Media issued 59,257 shares of common stock
valued at $248,876, based on the December 29, 2006 closing share price of
$4.20, for payment of Hollywood Media’s 401(k) employer match for calendar
year 2006 (see Note 2).
|
Year Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net
Revenues:
|
||||||||||||
Broadway
Ticketing
|
$ | 98,860,362 | $ | 110,918,969 | $ | 111,792,068 | ||||||
Ad
Sales
|
3,391,714 | 4,830,760 | 5,308,038 | |||||||||
Intellectual
Properties
|
1,126,834 | 1,308,202 | 1,061,118 | |||||||||
Other
|
- | - | - | |||||||||
$ | 103,378,910 | $ | 117,057,931 | $ | 118,161,224 | |||||||
Operating
Income (Loss):
|
||||||||||||
Broadway
Ticketing
|
$ | 4,809,588 | $ | 2,533,682 | $ | 2,652,352 | ||||||
Ad
Sales
|
(355,892 | ) | (3,977,171 | ) | (571,818 | ) | ||||||
Intellectual
Properties
|
(4,816 | ) | (71,372 | ) | (8,918 | ) | ||||||
Other
|
(7,646,552 | ) | (10,600,057 | ) | (10,535,791 | ) | ||||||
$ | (3,197,672 | ) | $ | (12,114,918 | ) | $ | (8,464,175 | ) | ||||
Capital
Expenditures (a)
|
||||||||||||
Broadway
Ticketing
|
$ | 1,088,501 | $ | 791,356 | $ | 2,725,762 | ||||||
Ad
Sales
|
31,694 | 208,577 | 438,572 | |||||||||
Intellectual
Properties
|
- | 897 | - | |||||||||
Other
|
69,946 | 289,609 | 229,092 | |||||||||
$ | 1,190,141 | $ | 1,290,439 | $ | 3,393,426 | |||||||
Depreciation
and
|
||||||||||||
Amortization
Expense:
|
||||||||||||
Broadway
Ticketing
|
$ | 846,603 | $ | 876,049 | $ | 351,310 | ||||||
Ad
Sales
|
354,932 | 901,351 | 553,237 | |||||||||
Intellectual
Properties
|
299 | 150 | - | |||||||||
Other
|
388,764 | 447,281 | 473,945 | |||||||||
$ | 1,590,598 | $ | 2,224,831 | $ | 1,378,492 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Segment
Assets:
|
||||||||
Broadway
Ticketing
|
$ | 30,386,157 | $ | 34,958,642 | ||||
Ad
Sales
|
16,376,839 | 21,989,086 | ||||||
Intellectual
Properties
|
475,140 | 543,989 | ||||||
Other
|
10,368,043 | 9,447,144 | ||||||
$ | 57,606,179 | $ | 66,938,861 |
|
(a)
|
Capital
expenditures do not include property and equipment acquired under capital
lease obligations or through acquisitions.
|
For
the quarter ended March 31, 2009
|
||||
Reported
|
||||
Net
revenues
|
$ | 21,313,897 | ||
Loss
from continuing operations
|
$ | (95,020 | ) | |
Loss
from discontinued operations
|
$ | - | ||
Net
loss attributable to Hollywood Media Corp.
|
$ | (91,853 | ) | |
Weighted
average shares
|
30,418,516 | |||
Loss
per share - continuing operations
|
$ | - | ||
Loss
per share - discontinued operations
|
$ | - | ||
Net
loss per share (1)
|
$ | - |
For
the quarter ended June 30, 2009
|
||||
Reported
|
||||
Net
revenues
|
$ | 30,252,255 | ||
Loss
from continuing operations
|
$ | (4,792,490 | ) | |
Loss
from discontinued operations
|
$ | - | ||
Net
loss attributable to Hollywood Media Corp.
|
$ | (4,794,716 | ) | |
Weighted
average shares
|
30,637,658 | |||
Loss
per share - continuing operations
|
$ | (0.16 | ) | |
Income
per share - discontinued operations
|
$ | - | ||
Net
loss per share (1)
|
$ | (0.16 | ) |
For
the quarter ended September 30, 2009
|
||||
Reported
|
||||
Net
revenues
|
$ | 21,854,666 | ||
Loss
from continuing operations
|
$ | (787,718 | ) | |
Gain
from discontinued operations
|
$ | 472,487 | ||
Net
loss attributable to Hollywood Media Corp.
|
$ | (348,993 | ) | |
Weighted
average shares
|
30,637,658 | |||
Loss
per share - continuing operations
|
$ | (0.03 | ) | |
Income
per share - discontinued operations
|
$ | 0.02 | ||
Net
loss per share (1)
|
$ | (0.01 | ) |
For
the quarter ended December 31, 2009
|
||||
Reported
|
||||
Net
revenues
|
$ | 29,958,092 | ||
Loss
from continuing operations
|
$ | (562,170 | ) | |
Gain
from discontinued operations
|
$ | 142,085 | ||
Net
loss attributable to Hollywood Media Corp.
|
$ | (384,855 | ) | |
Weighted
average shares
|
30,642,730 | |||
Loss
per share - continuing operations
|
$ | (0.02 | ) | |
Income
per share - discontinued operations
|
$ | - | ||
Net
loss per share (1)
|
$ | (0.02 | ) |
For
the quarter ended March 31, 2008
|
||||
Reported
|
||||
Net
revenues
|
$ | 26,973,670 | ||
Loss
from continuing operations
|
$ | (2,279,303 | ) | |
Loss
from discontinued operations
|
$ | (845,973 | ) | |
Net
loss attributable to Hollywood Media Corp.
|
$ | (3,149,038 | ) | |
Weighted
average shares
|
31,854,228 | |||
Loss
per share – continuing operations
|
$ | (0.07 | ) | |
Loss
per share – discontinued operations
|
$ | (0.03 | ) | |
Net
loss per share (1)
|
$ | (0.10 | ) |
For
the quarter ended June 30, 2008
|
||||
Reported
|
||||
Net
revenues
|
$ | 35,543,314 | ||
Loss
from continuing operations
|
$ | (17,500 | ) | |
Loss
from discontinued operations
|
$ | (674,802 | ) | |
Net
loss attributable to Hollywood Media Corp.
|
$ | (734,362 | ) | |
Weighted
average shares
|
31,964,851 | |||
Loss
per share - continuing operations
|
$ | - | ||
Loss
per share - discontinued operations
|
$ | (0.02 | ) | |
Net
loss per share (1)
|
$ | (0.02 | ) |
For
the quarter ended September 30, 2008
|
||||
Reported
|
||||
Net
revenues
|
$ | 25,522,782 | ||
Loss
from continuing operations
|
$ | (1,899,156 | ) | |
Loss
from discontinued operations
|
$ | (4,418,692 | ) | |
Net
loss attributable to Hollywood Media Corp.
|
$ | (6,349,599 | ) | |
Weighted
average shares
|
32,095,554 | |||
Loss
per share - continuing operations
|
$ | (0.06 | ) | |
Loss
per share - discontinued operations
|
$ | (0.14 | ) | |
Net
loss per share (1)
|
$ | (0.20 | ) |
For
the quarter ended December 31, 2008
|
||||
Reported
|
||||
Net
revenues
|
$ | 29,018,165 | ||
Loss
from continuing operations
|
$ | (6,288,127 | ) | |
Loss
from discontinued operations
|
$ | (351,405 | ) | |
Net
loss attributable to Hollywood Media Corp.
|
$ | (6,623,324 | ) | |
Weighted
average shares
|
31,263,293 | |||
Loss
per share - continuing operations
|
$ | (0.20 | ) | |
Loss
per share - discontinued operations
|
$ | (0.01 | ) | |
Net
loss per share (1)
|
$ | (0.21 | ) |
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 6,801,204 | $ | 11,764,810 | ||||
Receivables,
net
|
1,043,272 | 897,503 | ||||||
Inventories
held for sale, net
|
6,275,993 | 3,735,691 | ||||||
Deferred
ticket costs
|
8,906,280 | 10,985,160 | ||||||
Prepaid
expenses
|
2,642,107 | 1,896,237 | ||||||
Other
receivables
|
1,099,180 | 1,125,263 | ||||||
Other
current assets
|
25,943 | 436,675 | ||||||
Related
party receivable
|
206,379 | 335,245 | ||||||
Restricted
cash
|
1,221,000 | 1,221,000 | ||||||
Total
current assets
|
28,221,358 | 32,397,584 | ||||||
PROPERTY
AND EQUIPMENT, net
|
3,893,013 | 4,369,085 | ||||||
INVESTMENTS
IN AND ADVANCES TO UNCONSOLIDATED INVESTEES
|
750,430 | 230,097 | ||||||
INTANGIBLE
ASSETS, net
|
265,104 | 390,818 | ||||||
GOODWILL
|
20,230,119 | 20,197,513 | ||||||
OTHER
ASSETS
|
21,082 | 21,082 | ||||||
TOTAL
ASSETS
|
$ | 53,381,106 | $ | 57,606,179 | ||||
|
||||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$ | 1,048,781 | $ | 1,632,351 | ||||
Accrued
expenses and other
|
2,910,799 | 3,074,549 | ||||||
Deferred
revenue
|
11,661,726 | 14,012,178 | ||||||
Gift
certificate liability
|
3,601,090 | 3,794,899 | ||||||
Customer
deposits
|
460,682 | 948,273 | ||||||
Current
portion of capital lease obligations
|
75,564 | 123,061 | ||||||
Current
portion of notes payable
|
15,285 | 37,454 | ||||||
Total
current liabilities
|
19,773,927 | 23,622,765 | ||||||
DEFERRED
REVENUE
|
247,252 | 309,190 | ||||||
CAPITAL
LEASE OBLIGATIONS, less current portion
|
37,440 | 75,830 | ||||||
OTHER
DEFERRED LIABILITY
|
995,932 | 1,105,553 | ||||||
NOTES
PAYABLE, less current portion
|
- | 2,432 | ||||||
COMMITMENTS
AND CONTINGENCES
|
||||||||
SHAREHOLDERS’
EQUITY:
|
||||||||
Preferred
stock, $.01 par value, 1,000,000 shares authorized; none outstanding
|
- | - | ||||||
Common
stock, $.01 par value, 100,000,000 shares authorized; 31,179,066 and
31,037,656 shares issued and outstanding at June 30, 2010 and December 31,
2009, respectively
|
311,791 | 310,377 | ||||||
Additional
paid-in capital
|
309,722,146 | 309,480,331 | ||||||
Accumulated
deficit
|
(277,695,246 | ) | (277,315,848 | ) | ||||
Total
Hollywood Media Corp. shareholders’ equity
|
32,338,691 | 32,474,860 | ||||||
Non-controlling
interest
|
(12,136 | ) | 15,549 | |||||
Total
shareholders’ equity
|
32,326,555 | 32,490,409 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 53,381,106 | $ | 57,606,179 |
Six
Months Ended
June
30,
|
Three Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
NET
REVENUES
|
||||||||||||||||
Ticketing
|
$ | 54,908,530 | $ | 49,381,447 | $ | 32,681,447 | $ | 29,138,882 | ||||||||
Other
|
2,007,701 | 2,184,705 | 938 ,435 | 1,113,373 | ||||||||||||
56,916,231 | 51,566,152 | 33,619,882 | 30,252,255 | |||||||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||||||
Cost
of revenues – ticketing
|
45,318,633 | 41,152,654 | 27,121,997 | 24,118,554 | ||||||||||||
Editorial,
production, development and technology
|
1,329,794 | 1,236,913 | 640,628 | 594,923 | ||||||||||||
Selling,
general and administrative
|
5,401,426 | 5,117,994 | 2,884,474 | 2,437,983 | ||||||||||||
Payroll
and benefits
|
5,512,342 | 5,038,874 | 2,787,764 | 2,452,198 | ||||||||||||
Depreciation
and amortization
|
757,284 | 794,968 | 373,245 | 387,894 | ||||||||||||
Total
operating costs and expenses
|
58,319,479 | 53,341,403 | 33,808,108 | 29,991,552 | ||||||||||||
Income
(loss) from operations
|
(1,403,248 | ) | (1,775,251 | ) | (188,226 | ) | 260,703 | |||||||||
EARNINGS
(LOSSES) OF UNCONSOLIDATED INVESTEES
|
||||||||||||||||
Equity
in earnings (losses) of unconsolidated investees
|
548,868 | 1,912,833 | 168,921 | (810 | ) | |||||||||||
Impairment
loss
|
- | (5,000,000 | ) | - | (5,000,000 | ) | ||||||||||
Total
equity in earnings (losses) of unconsolidated investees
|
548,868 | (3,087,167 | ) | 168,921 | (5,000,810 | ) | ||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||
Interest,
net
|
11,704 | 15,122 | 466 | 3,670 | ||||||||||||
Other,
net
|
123,134 | (40,214 | ) | 63,807 | (56,053 | ) | ||||||||||
Income
(loss) from continuing operations
|
(719,542 | ) | (4,887,510 | ) | 44,968 | (4,792,490 | ) | |||||||||
Income
from discontinued operations
|
325,444 | - | 144,974 | - | ||||||||||||
Net
income (loss)
|
(394,098 | ) | (4,887,510 | ) | 189,942 | (4,792,490 | ) | |||||||||
NET
(INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
14,700 | 941 | 16,489 | (2,226 | ) | |||||||||||
Net
income (loss) attributable to Hollywood Media Corp.
|
$ | (379,398 | ) | $ | (4,886,569 | ) | $ | 206,431 | $ | (4,794,716 | ) | |||||
Basic
and diluted income (loss) per common share
|
||||||||||||||||
Continuing
operations
|
$ | (0.02 | ) | $ | (0.16 | ) | $ | 0.01 | $ | (0.16 | ) | |||||
Discontinued
operations
|
0.01 | - | - | - | ||||||||||||
Total
basic and diluted net income (loss) per share
|
$ | (0.01 | ) | $ | (0.16 | ) | 0.01 | $ | (0.16 | ) | ||||||
Weighted
average common and common equivalent shares outstanding – basic
|
30,907,452 | 30,528,692 | 30,945,735 | 30,637,658 | ||||||||||||
Weighted
average common and common equivalent shares outstanding – diluted
|
30,907,452 | 30,528,692 | 31,179,068 | 30,637,658 |
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (394,098 | ) | $ | (4,887,510 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating activities:
|
||||||||
Income
from discontinued operations
|
(325,444 | ) | - | |||||
Depreciation
and amortization
|
757,284 | 794,968 | ||||||
401(k)
stock match
|
75,567 | 85,364 | ||||||
Equity
in earnings of unconsolidated investees, net of distributions
|
(520,333 | ) | 1,369 | |||||
Stock
compensation expense - employees
|
11,557 | 11,917 | ||||||
Stock
compensation expense - officers
|
33,698 | 34,629 | ||||||
Provision
for bad debts
|
135,956 | 141,182 | ||||||
Distributions
to minority owners
|
(12,985 | ) | (21,609 | ) | ||||
Impairment
on inventories held for sale
|
150,000 | - | ||||||
Impairment
loss
|
- | 5,000,000 | ||||||
Changes
in assets and liabilities:
|
||||||||
Receivables
|
(281,725 | ) | (279,286 | ) | ||||
Inventories
held for sale
|
(2,690,302 | ) | (1,364,654 | ) | ||||
Deferred
ticket costs
|
2,078,880 | 3,702,806 | ||||||
Prepaid
expenses
|
(745,870 | ) | (164,949 | ) | ||||
Other
receivables
|
26,083 | 223,024 | ||||||
Related
party receivable
|
69,418 | 24,369 | ||||||
Other
current assets
|
410,732 | 79,462 | ||||||
Other
assets
|
- | 38,578 | ||||||
Accounts
payable
|
(616,823 | ) | 188,087 | |||||
Accrued
expenses and other
|
27,652 | (940,151 | ) | |||||
Deferred
revenue
|
(2,606,199 | ) | (4,287,642 | ) | ||||
Customer
deposits
|
(487,591 | ) | (216,037 | ) | ||||
Other
deferred liability
|
(109,621 | ) | (32,631 | ) | ||||
Restricted
cash
|
- | (1,221,000 | ) | |||||
Net
cash used in operating activities
|
(5,014,164 | ) | (3,089,714 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
expenditures
|
(161,724 | ) | (997,267 | ) | ||||
Loss
on disposition of assets
|
- | (23,946 | ) | |||||
Proceeds
from sale of assets
|
322,123 | - | ||||||
Acquisition
of businesses, net of cash acquired
|
647 | - | ||||||
Net
cash provided by (used in) investing activities
|
161,046 | (1,021,213 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repayments
under capital lease obligations
|
(85,887 | ) | (93,781 | ) | ||||
Repayments
of notes payable
|
(24,601 | ) | (13,423 | ) | ||||
Stock
repurchase program
|
- | (72,954 | ) | |||||
Net
cash used in financing activities
|
(110,488 | ) | (180,158 | ) | ||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(4,963,606 | ) | (4,291,085 | ) | ||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
11,764,810 | 12,685,946 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 6,801,204 | $ | 8,394,861 | ||||
SUPPLEMENTAL
SCHEDULE OF CASH RELATED ACTIVITIES:
|
||||||||
Interest
paid
|
$ | 19,800 | $ | 23,292 | ||||
Income
taxes paid
|
$ | 1,336 | $ | 1,500 |
For the Six Months
|
For the Three Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Basic
weighted average shares outstanding
|
30,907,452 | 30,528,692 | 30,945,735 | 30,637,658 | ||||||||||||
Effect
of dilutive unvested restricted stock
|
- | - | 233,333 | - | ||||||||||||
Effect
of options and other equity instruments
|
- | - | - | - | ||||||||||||
Dilutive
weighted average shares outstanding
|
30,907,452 | 30,528,692 | 31,179,068 | 30,637,658 | ||||||||||||
Unvested
restricted stock which are not included in the calculation of diluted
income (loss) per share because their impact is anti-dilutive
|
233,333 | 400,000 | - | 400,000 | ||||||||||||
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
|
1,104,689 | 1,423,443 | 1,104,689 | 1,423,443 |
|
·
|
On
February 19, 2010, Hollywood Media issued 141,410 shares of common stock
valued at the December 31, 2009 closing share price of $1.40, or
$197,974, for payment of Hollywood Media’s 401(k) employer match for the
calendar year 2009.
|
|
·
|
On
March 30, 2009, Hollywood Media issued 225,343 shares of common stock
valued at the December 31, 2008 closing share price of $1.00, or
$225,343, for payment of Hollywood Media’s 401(k) employer match for the
calendar year 2008.
|
Six
months ended
June
30,
|
Three
months ended
June
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unau dited)
|
|||||||||||||
Net
Revenues:
|
||||||||||||||||
Broadway
Ticketing
|
$ | 54,908,530 | $ | 49,381,447 | $ | 32,681,447 | $ | 29,138,882 | ||||||||
Ad
Sales
|
1,513,117 | 1,664,619 | 731,554 | 849,261 | ||||||||||||
Intellectual
Properties
|
494,584 | 520,086 | 206,881 | 264,112 | ||||||||||||
Other
|
- | - | - | - | ||||||||||||
$ | 56,916,231 | $ | 51,566,152 | $ | 33,619,882 | $ | 30,252,255 | |||||||||
Operating
Income (Loss):
|
||||||||||||||||
Broadway
Ticketing
|
$ | 2,641,759 | $ | 2,171,013 | $ | 1,891,924 | $ | 2,053,088 | ||||||||
Ad
Sales
|
(290,298 | ) | (158,650 | ) | (156,411 | ) | (45,215 | ) | ||||||||
Intellectual
Properties
|
(34,898 | ) | (1,958 | ) | (38,714 | ) | 4,597 | |||||||||
Other
|
(3,719,811 | ) | (3,785,656 | ) | (1,885,025 | ) | (1,751,767 | ) | ||||||||
$ | (1,403,248 | ) | $ | (1,775,251 | ) | $ | (188,226 | ) | $ | 260,703 | ||||||
Capital
Expenditures:
|
||||||||||||||||
Broadway
Ticketing
|
$ | 152,946 | $ | 932,085 | $ | 66,862 | $ | 374,545 | ||||||||
Ad
Sales
|
- | 15,035 | - | 13,821 | ||||||||||||
Intellectual
Properties
|
- | - | - | - | ||||||||||||
Other
|
8,778 | 50,147 | 4,447 | 50,147 | ||||||||||||
$ | 161,724 | $ | 997,267 | $ | 71,309 | $ | 438,513 | |||||||||
Depreciation
and
|
||||||||||||||||
Amortization
Expense:
|
||||||||||||||||
Broadway
Ticketing
|
$ | 449,499 | $ | 414,194 | $ | 224,634 | $ | 198,934 | ||||||||
Ad
Sales
|
142,512 | 182,146 | 66,804 | 91,164 | ||||||||||||
Intellectual
Properties
|
149 | 150 | 74 | 75 | ||||||||||||
Other
|
165,124 | 198,478 | 81,733 | 97,721 | ||||||||||||
$ | 757,284 | $ | 794,968 | $ | 373,245 | $ | 387,894 |
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Segment
Assets:
|
||||||||
Broadway
Ticketing
|
$ | 29,419,507 | $ | 30,386,157 | ||||
Ad
Sales
|
16,218,478 | 16,376,839 | ||||||
Intellectual
Properties
|
379,903 | 475,140 | ||||||
Other
|
7,363,218 | 10,368,043 | ||||||
$ | 53,381,106 | $ | 57,606,179 |
|
•
|
licensing
and permitting;
|
|
•
|
human
health, safety and sanitation requirements;
|
|
•
|
the
service of food and alcoholic beverages;
|
|
•
|
working
conditions, labor, minimum wage and hour, citizenship and employment laws;
|
|
•
|
compliance
with The Americans with Disabilities Act of 1990;
|
|
•
|
sales
and other taxes and withholding of taxes;
|
|
•
|
historic
landmark rules; and
|
|
•
|
environmental
protection.
|
|
•
|
Charles
Playhouse (Boston)- own;
|
|
•
|
Colonial
Theatre (Boston)- lease;
|
|
•
|
State
Theatre (Minneapolis)- manage;
|
|
•
|
Orpheum
Theatre (Minneapolis)- manage;
|
|
•
|
Pantages
Theatre (Minneapolis)- manage; and
|
|
•
|
France-Merrick
Performing Arts Center (a/k/a Hippodrome Theatre) (Baltimore)-operator
|
Number of shares of
common stock to be issued
upon exercise of
outstanding options
|
Weighted-average exercise
price of outstanding
options
|
Number of shares of
common stock remaining
for future issuance under
plan
|
||||||||||
2009
Stock Incentive Plan
|
10,000 | $ | 46.66 | 90,000 |
O perating
Metrics for the Six Month Period Ended:
|
June 30, 2010
|
June 30, 2009
|
% Change
|
|||||||||
Estimated
presented weeks under guarantee arrangements (1)
|
176 | 166 | 6 | % | ||||||||
Estimated
presented weeks under 4-wall and similar
|
||||||||||||
arrangements
(2)
|
34 | 85 | -60 | % | ||||||||
Estimated
total presented weeks (3)
|
210 | 251 | -16 | % | ||||||||
Estimated
total attendance at presented performances (4)
|
2,649,043 | 3,454,568 | -23 | % | ||||||||
Estimated
attendance per presented performance
|
1,586 | 1,720 | -8 | % |
2010
|
2009
|
|||||||
Interest
expense
|
$ | 0.6 | $ | 0.8 | ||||
Amortization
of deferred financing costs
|
0.1 | 0.1 | ||||||
Interest
income
|
(0.1 | ) | (0.2 | ) | ||||
Total
interest expense, net
|
$ | 0.6 | $ | 0.7 |
Operating Metrics for the Year Ended:
|
December 31, 2009
|
December 31, 2008
|
% Change
|
|||||||||
Days
of operation in reporting period (1)
|
365 | 344 | 6 | % | ||||||||
Estimated
presented weeks under guarantee
|
||||||||||||
arrangements
(2)
|
296 | 237 | 25 | % | ||||||||
Estimated
presented weeks under 4-wall
|
||||||||||||
arrangements
(3)
|
110 | 106 | 4 | % | ||||||||
Estimated
total presented weeks (4)
|
406 | 343 | 18 | % | ||||||||
Estimated
total attendance at presented events
|
5,652,395 | 4,711,938 | 20 | % | ||||||||
Estimated
attendance per presented event
|
1,743 | 1,718 | 2 | % |
2009
|
2008
|
|||||||
Interest
expense
|
$ | 1.1 | $ | 3.7 | ||||
Amortization
of debt discount
|
- | 0.5 | ||||||
Amortization
of deferred financing costs
|
0.3 | 0.6 | ||||||
Interest
income
|
- | (0.7 | ) | |||||
Total
interest expense, net
|
$ | 1.4 | $ | 4.1 |
June 30, 2010
|
December 31, 2009
|
|||||||
Revolving
credit facility
|
$ | 22.3 | $ | 29.3 | ||||
Notes
payable
|
0.1 | 5.3 | ||||||
Capital
leases
|
1.7 | 2.3 | ||||||
Total
debt
|
24.1 | 36.9 | ||||||
Less:
current maturities
|
(23.6 | ) | (8.8 | ) | ||||
Total
debt, net of current maturities
|
$ | 0.5 | $ | 28.1 |
For
The Years Ended
|
||||||||||||
June 30,
|
Capital leases
|
Debt
|
Total
|
|||||||||
2011
|
$ | 1.2 | $ | 22.4 | $ | 23.6 | ||||||
2012
|
0.5 | - | 0.5 | |||||||||
2013
|
- | - | - | |||||||||
2014
|
- | - | - | |||||||||
2015
|
- | - | - | |||||||||
Total
|
$ | 1.7 | $ | 22.4 | $ | 24.1 |
Noncancelable
|
||||||||
Year
Ended
|
Operating
|
Noncancelable
|
||||||
June 30,
|
Leases
|
Contracts
|
||||||
2011
|
$ | 1.7 | $ | 0.4 | ||||
2012
|
1.1 | 0.3 | ||||||
2013
|
0.8 | 0.2 | ||||||
2014
|
0.6 | 0.2 | ||||||
Thereafter
|
1.2 | 1.4 | ||||||
Total
|
$ | 5.4 | $ | 2.5 |
($s
in millions)
|
||||||||
For
the Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash provided by (used in):
|
||||||||
Operating
activities
|
$ | 11.6 | $ | (9.4 | ) | |||
Investing
activities
|
(3.6 | ) | (5.9 | ) | ||||
Financing
activities
|
(4.7 | ) | 7.6 | |||||
Effect
of foreign currency exchange rates on cash
|
- | 0.9 | ||||||
Net
increase (decrease) in unrestricted cash
|
$ | 3.3 | $ | (6.8 | ) |
($s
in millions)
|
||||||||
For the Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash provided by (used in):
|
||||||||
Operating
activities
|
$ | (8.7 | ) | $ | 3.4 | |||
Investing
activities
|
(13.1 | ) | (11.5 | ) | ||||
Financing
activities
|
14.9 | 10.6 | ||||||
Effect
of foreign currency exchange rates on cash
|
2.3 | (0.9 | ) | |||||
Net
increase (decrease) in unrestricted cash
|
$ | (4.6 | ) | $ | 1.6 |
Historical Statements
|
Pro forma
|
|||||||||||||||
|
|
Combining
|
Combined
|
|||||||||||||
Key Brand
|
TDI
|
Adjustments
|
Statement
|
|||||||||||||
ASSETS
|
||||||||||||||||
Current
assets
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 14,902 | $ | 2,346 | $ | 6,728 |
(a)
|
$ | 23,976 | |||||||
Restricted
cash
|
8,428 | 1,221 | - | 9,649 | ||||||||||||
Accounts
receivable, net
|
8,925 | 428 | - | 9,353 | ||||||||||||
Inventory
|
39 | 6,426 | - | 6,465 | ||||||||||||
Deferred
ticket costs
|
- | 8,906 | - | 8,906 | ||||||||||||
Prepaid
expenses
|
8,944 | 269 | - | 9,213 | ||||||||||||
Investments
in theatrical partnerships
|
12,403 | - | - | 12,403 | ||||||||||||
Other
current assets
|
6,828 | 791 | (1,200 |
)(b)
|
6,419 | |||||||||||
Total
current assets
|
60,469 | 20,388 | 5,528 | 86,385 | ||||||||||||
Property,
plant and equipment, net of depreciation
|
9,997 | 3,352 | (300 |
)(c)
|
13,049 | |||||||||||
Intangible
assets, net of amortization
|
21,006 | 196 | 9,473 |
(d)
|
30,675 | |||||||||||
Goodwill
|
52,340 | - | 23,567 |
(e)
|
75,907 | |||||||||||
Other
long-term assets including debt discount
|
11,196 | - | - | 11,196 | ||||||||||||
Deferred
taxes
|
9,018 | - | - | 9,018 | ||||||||||||
Total
assets
|
$ | 164,026 | $ | 23,935 | $ | 38,269 | $ | 226,230 | ||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||||||
Current
liabilities
|
||||||||||||||||
Accounts
payable and accrued expenses
|
$ | 15,816 | $ | 2,263 | $ | 1,640 |
(f)
|
$ | 19,719 | |||||||
Accrued
third party ticket collections payable
|
33,627 | - | - | 33,627 | ||||||||||||
Deferred
revenue
|
45,582 | 14,208 | $ | 3,940 |
(g)
|
63,730 | ||||||||||
Current
portion of long-term debt including capital lease
|
23,547 | 4 | - | 23,551 | ||||||||||||
Other
current liabilities
|
5,578 | - | - | 5,578 | ||||||||||||
Total
current liabilities
|
124,150 | 16,476 | 5,580 | 146,206 | ||||||||||||
Long-term
debt and capital lease
|
514 | - | 7,924 |
(h)
|
8,438 | |||||||||||
Other
long-term liabilities
|
2,671 | 861 | 29,571 |
(i)
|
33,103 | |||||||||||
Total
liabilities
|
127,335 | 17,336 | 43,075 | 187,746 | ||||||||||||
Commitments
and contingencies
|
- | - | - | - | ||||||||||||
Stockholders'
equity
|
||||||||||||||||
Common
stock
|
32,057 | - | - | 32,057 | ||||||||||||
Additional
paid-in capital
|
13,850 | 11,279 | (11,279 |
)(j)
|
13,850 | |||||||||||
Accumulated
deficit
|
(15,194 | ) | (4,680 | ) | 4,680 |
(k)
|
(15,194 | ) | ||||||||
Accumulated
other comprehensive income (loss)
|
1,072 | - | - | 1,072 | ||||||||||||
Noncontrolling
interests
|
4,906 | - | 1,792 |
(l)
|
6,698 | |||||||||||
- | ||||||||||||||||
Total
stockholders' equity
|
36,691 | 6,599 | (4,806 | ) | 38,483 | |||||||||||
Total
liabilities and stockholders' equity
|
$ | 164,026 | $ | 23,935 | $ | 38,269 | $ | 226,230 |
Historical Statements
|
Pro forma
|
|||||||||||||||
|
|
Combining
|
Combined
|
|||||||||||||
Key
Brand
|
TDI
|
Adjustments
|
Statement
|
|||||||||||||
INCOME
STATEMENT
|
||||||||||||||||
Revenue
|
$ | 137,544 | $ | 54,909 | - | $ | 192,453 | |||||||||
Direct
operating expenses
|
116,718 | 45,169 | - | 161,887 | ||||||||||||
Selling,
general and administrative expenses
|
26,235 | 6,499 | (111 |
)(m)
|
32,623 | |||||||||||
Depreciation
and amortization expense
|
2,648 | 450 | 477 |
(n)
|
3,575 | |||||||||||
Operating
income (loss)
|
(8,057 | ) | 2,791 | (366 | ) | (5,631 | ) | |||||||||
Interest
expense, net
|
567 | - | 568 |
(o)
|
1,135 | |||||||||||
Other
expense, net
|
129 | - | - | 129 | ||||||||||||
Pre-tax
income (loss)
|
(8,753 | ) | 2,791 | (933 | ) | (6,895 | ) | |||||||||
Income
tax expense (benefit)
|
(3,208 | ) | - | - | (3,208 | ) | ||||||||||
Net
income (loss)
|
(5,545 | ) | 2,791 | (933 | ) | (3,687 | ) | |||||||||
Net
income attributable to noncontrolling interests
|
210 | - | - | 210 | ||||||||||||
Net
income (loss) attributable to Key Brand Entertainment
|
(5,335 | ) | $ | 2,791 | $ | (933 | ) | $ | (3,477 | ) | ||||||
Net
loss attributable to Key Brand common stockholders per common
share:
|
||||||||||||||||
Basic
|
$ | (6.55 | ) | $ | (4.27 | ) | ||||||||||
Diluted
|
$ | (6.55 | ) | $ | (4.27 | ) | ||||||||||
Weighted
average common shares outstanding (000s):
|
||||||||||||||||
Basic
|
815 | 815 | ||||||||||||||
Diluted
|
860 | 860 |
Historical Statements
|
Pro forma
|
|||||||||||||||
|
|
Combining
|
Combined
|
|||||||||||||
Key Brand
|
TDI
|
Adjustments
|
Statement
|
|||||||||||||
INCOME
STATEMENT
|
||||||||||||||||
Revenue
|
$ | 208,217 | $ | 98,860 | $ | (350 |
)(p)
|
$ | 306,727 | |||||||
Direct
operating expenses
|
163,926 | 81,015 | (350 |
)(q)
|
244,591 | |||||||||||
Selling,
general and administrative expenses
|
45,326 | 12,190 | (167 |
)(r)
|
57,349 | |||||||||||
Depreciation
and amortization expense
|
4,872 | 847 | 953 |
(s)
|
6,672 | |||||||||||
Operating
income (loss)
|
(5,907 | ) | 4,808 | (786 | ) | (1,885 | ) | |||||||||
Interest
expense, net
|
1,365 | (13 | ) | 1,135 |
(t)
|
2,487 | ||||||||||
Other
expense (income) net
|
1,446 | 123 | - | 1,569 | ||||||||||||
Pre-tax
income (loss)
|
(8,718 | ) | 4,699 | (1,921 | ) | (5,940 | ) | |||||||||
Income
tax expense (benefit)
|
(7,215 | ) | - | - | (7,215 | ) | ||||||||||
Net
income (loss)
|
(1,503 | ) | 4,699 | (1,921 | ) | 1,275 | ||||||||||
Net
loss attributable to noncontrolling interests
|
(607 | ) | - | - | (607 | ) | ||||||||||
Net
income (loss) attributable to Key Brand Entertainment
|
$ | (896 | ) | $ | 4,699 | $ | (1,921 | ) | $ | 1,882 | ||||||
Net
Income (Loss) attributable to Key Brand common stockholders per common
share:
|
||||||||||||||||
Basic
|
$ | (1.10 | ) | $ | 2.31 | |||||||||||
Diluted
|
$ | (1.10 | ) | $ | 2.11 | |||||||||||
Weighted
average common shares outstanding (000s):
|
||||||||||||||||
Basic
|
815 | 815 | ||||||||||||||
Diluted
|
890 | 890 |
Estimated
fair value of Purchase Price
|
||||
Cash
paid at closing
|
$ | 20,000 | ||
Liabilities
assumed at closing (1)
|
1,600 | |||
Promissory
note (2)
|
7,924 | |||
Earn-out
(3)
|
4,531 | |||
TDI
warrant (4)
|
1,792 | |||
Subotal
|
35,847 | |||
Estimated
purchase price adjustment (5)
|
3,412 | |||
Total
estimated purchase price as of 6-30-10
|
$ | 39,259 |
|
(1)
|
Reflects
the estimated fair value of liabilities assumed by Key
Brand.
|
|
(2)
|
Reflects
the estimated fair value of deferred payments associated with the
promissory note.
|
|
(3)
|
Reflects
the estimated fair value of deferred payments associated with contingent
earn-out consideration.
|
|
(4)
|
Reflects
the estimated fair value of the warrant to purchase 5% of fully diluted
common shares of TDI.
|
|
(5)
|
Reflects
the estimated Purchase Price Adjustment based on TDI working capital
balances as of June 30, 2010.
|
Estimated
fair value of purchase consideration
|
$ | 39,259 | ||||||
Less:
Recognized fair value of identifiable assets acquired and liabilities
assumed:
|
||||||||
Cash
and cash equivalents
|
2,346 | |||||||
Restricted
cash
|
1,221 | |||||||
Accounts
receivable
|
428 | |||||||
Inventory
|
6,426 | |||||||
Deferred
ticket costs
|
8,906 | |||||||
Prepaid
expenses
|
269 | |||||||
Other
current assets
|
791 | |||||||
Property,
plant and equipment
|
3,052 | |||||||
Intangible
assets
|
9,669 | |||||||
Accounts
payable and accrued expenses
|
(2,303 | ) | ||||||
Deferred
revenue
|
(14,208 | ) | ||||||
Current
portion of long-term debt including capital lease
|
(4 | ) | ||||||
Other
long-term liabilities
|
(901 | ) | ||||||
15,692 | ||||||||
Goodwill
|
$ | 23,567 |
Estimated
|
||||||||||
Estimated
|
Remaining
|
|||||||||
Intangible Asset
|
Valuation Method
|
Fair Value
|
Useful Lives
|
|||||||
Trademarks
and tradenames
|
Relief
from Royalty (1)
|
$ | 6,268 | 15 | ||||||
Customer
database
|
Relief
from Royalty (1)
|
2,011 | 5 | |||||||
Noncompete
|
Lost
Income (2)
|
530 | 7 | |||||||
Website
URL
|
Market
Approach (3)
|
860 | 15 | |||||||
Total
definite-lived intangible assets
|
$ | 9,669 |
|
(1)
|
The
estimated fair value attributable to trademarks, tradenames and customer
database were derived under the Relief-From-Royalty Method which estimates
an intangible asset’s value based on the cost savings realized by its
owner as a result of not having to pay a royalty to a third party for
using the asset.
|
|
(2)
|
The
fair value attributed to the non-compete agreements was based on the
present value of estimated lost income that would occur absent the
existence of noncompetition
agreements.
|
|
(3)
|
The
estimated fair value of the primary URL was determined under the market
approach which is based on a comparison of the asset to similar assets
that were part of a public or private
transaction.
|
Key
Brand Entertainment
|
||||
Unaudited
Condensed Combined Financial Statements - Pro Forma Combining Journal
Entries
|
||||
As
of 6-30-10 and for the Six Month Period Ending 6-30-10
|
||||
$s
in 000s unless otherwise indicated
|
||||
PRO
FORMA COMBINING ENTRIES - Balance Sheet as of 6-30-10
|
||||
(a)
Represents the following adjustments to cash and cash
equivalents:
|
||||
Purchase
price, cash paid at closing
|
$ | (20,000 | ) | |
Working
capital adjustment to purchase price cash paid at closing
|
(3,412 | ) | ||
To
record pro forma impact of nonoperating transactions completed after June
30
|
28,940 | |||
Cash
deposit released from escrow upon consumation of the
transaction
|
1,200 | |||
Adjustments
to cash and cash equivalents
|
$ | 6,728 | ||
(b)
Represents the following adjustment to other current
assets:
|
||||
Cash
deposit released from escrow upon consumation of the
transaction
|
$ | (1,200 | ) | |
(c)
Represents the following adjustment to plant, property &
equipment:
|
||||
Elimination
of abandoned software investment
|
$ | (300 | ) | |
(d)
Represents the following adjustments to intangible assets:
|
||||
Adjustment
of TDI intangible assets to fair value
|
$ | 9,669 | ||
Elimination
of TDI historical balance of intangible assets
|
(196 | ) | ||
Adjustments
to intangible assets
|
$ | 9,473 | ||
(e)
Represents the following adjustments to goodwill:
|
||||
To
record goodwill arising from the transaction. Goodwill is measured as the
excess of the
|
||||
estimated
value of purchase consideration over the fair value of assets acquired
and
|
||||
liabilites
assumed.
|
$ | 23,567 | ||
Elimination
of TDI historical balance of goodwill.
|
- | |||
Adjustments
to goodwill
|
$ | 23,567 | ||
(f)
Represents the following adjustments to accrued
liabilities:
|
||||
Adjustment
of TDI accrued liabilities to reflect fair value of historical
obligations
|
$ | 40 | ||
To
record executive compensation liability arising in connection with the
transaction
|
1,600 | |||
Adjustments
to accrued liabilities
|
$ | 1,640 | ||
(g)
Represents the following adjustments to deferred revenue:
|
||||
To
record pro forma impact of nonoperating transactions completed after June
30
|
3,940 | |||
(h)
Represents the following adjustments to long-term debt:
|
||||
To
record promissory note payable to HMC
|
8,500 | |||
To
record debt discount related to promissory note to HMC
(i-1)
|
(576 | ) | ||
Adjustments
to long term debt
|
$ | 7,924 | ||
(i-1)
Debt discount will be amortized to interest expense over the term of the
note using the effective interest method.
|
||||
(i)
Represents the following adjustments to other long-term
liabilities:
|
||||
Adjustment
of TDI long-term liabilities to reflect fair value of historical
obligations
|
$ | 40 | ||
To
record pro forma impact of nonoperating transaction completed after June
30
|
$ | 25,000 | ||
To
record fair value of earn-out obligation
|
4,531 | |||
Adjustments
to other long-term liabilities
|
$ | 29,571 | ||
(j)
Represents the following adjustment to additional paid in
capital:
|
||||
Elimination
of historical TDI paid in capital
|
$ | (11,279 | ) | |
(k)
Represents the following adjustment to accumulated
deficit:
|
||||
Elimination
of historical TDI accumulated deficit
|
$ | 4,680 | ||
(l)
Represents the following adjustment to noncontrolling
interests:
|
||||
To
record fair value of TDI warrant
|
$ | 1,792 | ||
PRO
FORMA COMBINING ENTRIES - Income Statement as of 6-30-10
|
||||
(m)
Represents the following adjustment to selling, general and administrative
expenses:
|
||||
Elimination
of one-time expense related directly to the transaction.
|
$ | (111 | ) | |
(n)
Represents the following adjustment to depreciation and
amortization:
|
||||
To
record pro forma amortization of purchase accounting
intangibles.
|
$ | 477 | ||
(o)
Represents the following adjustment to interest expense:
|
||||
To
record interest expense on HOLL note
|
$ | 568 | ||
PRO
FORMA COMBINING ENTRIES - Income Statement as of 12-31-09
|
||||
(p)
Represents the following adjustments to revenue:
|
||||
Eliminate
intercompany revenue related to Irving Berlin's White
Christmas
|
$ | (261 | ) | |
Eliminate
intercompany revenue related to group sales
|
(89 | ) | ||
Adjustments
to revenue
|
$ | (350 | ) | |
(q)
Represents the following adjustments to direct operating
expenses:
|
||||
Eliminate
intercompany expenses related to Irving Berlin's White
Christmas
|
$ | (261 | ) | |
Eliminate
intercompany expenses related to group sales
|
(89 | ) | ||
Adjustments
to direct operating expenses
|
$ | (350 | ) | |
(r)
Represents the following adjustment to selling, general and administrative
expenses:
|
||||
Reverse
non-recurring expense directly related to the Transaction
|
$ | (167 | ) | |
(s)
Represents the following adjustment to depreciation and amortization
expense:
|
||||
To
record pro forma amortization of purchase accounting intangible
assets
|
$ | 953 | ||
(t)
Represents the following adjustment to interest expense:
|
||||
To
record interest expense on the HOLL note
|
$ | 1,135 |
Fair
value of purchase consideration
|
35,847 | |||||||
Estimated
Working Capital Adjustment at 6/30/10
|
3,412 | |||||||
Adjusted
consideration
|
39,259 | |||||||
Less:
Recognized fair value of identifiable assets acquired and liabilities
assumed as of 6-30-10
|
||||||||
Cash
and cash equivalents
|
2,346 | |||||||
Restricted
cash
|
1,221 | |||||||
Accounts
receivable, net
|
428 | |||||||
Inventory
|
6,426 | |||||||
Deferred
ticket costs
|
8,906 | |||||||
Prepaid
expenses
|
269 | |||||||
Other
current assets
|
791 | |||||||
Property, plant and equipment,
net of depreciation
|
(1)
|
3,052 | ||||||
Intangible assets, net of
amortization
|
(2)
|
9,669 | ||||||
Accounts payable and accrued
expenses
|
(3)
|
(2,303 | ) | |||||
Accrued
third party ticket collections payable
|
- | |||||||
Deferred
revenue
|
(14,208 | ) | ||||||
Current
portion of long-term debt including capital lease
|
(4 | ) | ||||||
Long-term
debt and capital lease
|
- | |||||||
Other long-term liabilities
|
(3)
|
(901 | ) | |||||
15,692 | ||||||||
Goodwill
|
23,567 | |||||||
Working
capital adjustment
|
3,412 |
Estimated fair value of
purchase consideration
|
$ | 39,259 | ||||||
Less:
Recognized fair value of identifiable assets acquired and liabilities
assumed as of 6-30-10
|
||||||||
Cash
and cash equivalents
|
2,346 | |||||||
Restricted
cash
|
1,221 | |||||||
Accounts
receivable
|
428 | |||||||
Inventory
|
6,426 | |||||||
Deferred
ticket costs
|
8,906 | |||||||
Prepaid
expenses
|
269 | |||||||
Other
current assets
|
791 | |||||||
Property,
plant and equipment
|
3,052 | |||||||
Intangible
assets
|
9,669 | |||||||
Accounts
payable and accrued expenses
|
(2,303 | ) | ||||||
Deferred
revenue
|
(14,208 | ) | ||||||
Current
portion of long-term debt including capital lease
|
(4 | ) | ||||||
Other
long-term liabilities
|
(901 | ) | ||||||
15,692 | ||||||||
Goodwill
|
$ | 23,567 |
HOLL 14D dated 4/28/10
|
Mid-Point of
HMC
|
|||||||||||||||||||
Nominal
|
High Estimate
|
Low Estimate
|
High & Low
|
Key Brand
|
||||||||||||||||
Fair
value of purchase consideration
|
||||||||||||||||||||
Cash
|
20,000 | 20,000 | 20,000 | 20,000 | 20,000 | |||||||||||||||
Assumed
Liability
|
1,600 | 1,600 | 1,600 | 1,600 | 1,600 | |||||||||||||||
Note
|
13,600 | 8,700 | 7,100 | 7,900 | 7,924 | |||||||||||||||
Earn-out
|
14,000 | 7,300 | 3,800 | 5,550 | 4,531 | |||||||||||||||
Warrant
|
1,000 | 1,800 | 400 | 1,100 | 1,792 | |||||||||||||||
Subotal
|
50,200 | 39,400 | 32,900 | 36,150 | 35,847 | |||||||||||||||
Working
Capital Adjustment, pro forma as of 6-30-10
|
3,412 | 3,412 | 3,412 | 3,412 | 3,412 | |||||||||||||||
Total
|
53,612 | 42,812 | 36,312 | 39,562 | 39,259 |
$s
in 000s unless otherwise indicated
|
||||
Estimated
fair value of Purchase Price
|
||||
Cash
paid at closing
|
$ | 20,000 | ||
Liabilities
assumed at closing (1)
|
1,600 | |||
Promissory
note (2)
|
7,924 | |||
Earn-out
(3)
|
4,531 | |||
TDI
warrant (4)
|
1,792 | |||
Subotal
|
35,847 | |||
Estimated
purchase price adjustment (5)
|
3,412 | |||
Total
estimated purchase price as of 6-30-10
|
$ | 39,259 |
Intangible Asset
|
Valuation Method
|
Estimated
Fair Value
|
Estimated
Remaining
Useful
Lives
|
|||||||
Trademarks
and tradenames
|
Royalty
Savings
|
$ | 6,268 | 15 | ||||||
Customer
database
|
Royalty
Savings
|
2,011 | 5 | |||||||
Website
platform technology
|
Cost
Approach
|
- | 3 | |||||||
NYC
office lease
|
Income
Approach
|
- | 6.5 | |||||||
Noncompete
|
Lost
Income
|
530 | 7 | |||||||
Website
URL
|
Market
Approach
|
860 | 15 | |||||||
Total
definite-lived intangible assets
|
$ | 9,669 |
Definite Life Intangible Asset
|
Estimated Fair Value
|
Estimated
Remaining
Useful
Lives
|
Amortization
Expense for
the Year
Ended
December 31,
2009
|
Amortization
Expense for
the Quarter
Ended March
31, 2010
|
Amortization
Expense for
the Six
Months Ended
June 30,
2010
|
|||||||||||||||
Trademarks
and tradenames including URLs
|
$ | 6,268 | 15 | $ | 418 | $ | 104 | $ | 209 | |||||||||||
Customer
database
|
2,011 | 5 | 402 | 101 | 201 | |||||||||||||||
Website
platform technology
|
- | 3 | - | - | - | |||||||||||||||
NYC
office lease
|
- | 6.5 | - | - | - | |||||||||||||||
Noncompete
|
530 | 7 | 76 | 19 | 38 | |||||||||||||||
Website
URL
|
860 | 15 | 57 | 14 | 29 | |||||||||||||||
Total
definite-lived intangible assets
|
$ | 9,669 | $ | 953 | $ | 238 | $ | 477 |
Intangible Asset
|
Valuation Method
|
Estimated
Fair Value
|
Estimated
Remaining
Useful
Lives
|
|||||||
Trademarks
and tradenames
|
Relief
from Royalty (1)
|
$ | 6,268 | 15 | ||||||
Customer
database
|
Relief
from Royalty (1)
|
2,011 | 5 | |||||||
Noncompete
|
Lost
Income (2)
|
530 | 7 | |||||||
Website
URL
|
Market
Approach (3)
|
860 | 15 | |||||||
Total
definite-lived intangible assets
|
$ | 9,669 |
YEARS ENDED DECEMBER 31,
|
SIX MONTHS ENDED JUNE 30,
|
|||||||||||||||||||||||||||
2009
|
2008
|
2007
|
2006 *
|
2005 *
|
2010
|
2009
|
||||||||||||||||||||||
INCOME
STATEMENT
|
||||||||||||||||||||||||||||
Revenue
|
208,217 | $ | 197,009 | - | - | - | 137,544 | 125,261 | ||||||||||||||||||||
Direct
operating expenses
|
163,926 | 148,960 | - | - | - | 116,718 | 97,547 | |||||||||||||||||||||
Selling,
general and administrative expenses
|
45,326 | 40,540 | 1,088 | - | - | 26,235 | 20,749 | |||||||||||||||||||||
Depreciation
and amortization expense
|
4,872 | 4,354 | - | - | - | 2,648 | 1,925 | |||||||||||||||||||||
Operating
income (loss)
|
(5,907 | ) | 3,155 | (1,088 | ) | - | - | (8,057 | ) | 5,040 | ||||||||||||||||||
Interest
expense, net
|
(1,365 | ) | (4,110 | ) | (1,686 | ) | - | - | (567 | ) | (693 | ) | ||||||||||||||||
Other
expense (income) net
|
(1,446 | ) | (4,410 | ) | - | - | - | (129 | ) | (1,161 | ) | |||||||||||||||||
Pre-tax
income (loss)
|
(8,718 | ) | (5,365 | ) | (2,775 | ) | - | - | (8,753 | ) | 3,186 | |||||||||||||||||
Income
tax expense (benefit)
|
(7,215 | ) | 753 | - | - | - | (3,208 | ) | 1,333 | |||||||||||||||||||
Net
income (loss)
|
(1,503 | ) | (6,118 | ) | (2,775 | ) | - | - | (5,545 | ) | 1,853 | |||||||||||||||||
Net
Income (loss) attributable to noncontrolling interests
|
(607 | ) | 70 | - | - | - | 210 | (104 | ) | |||||||||||||||||||
Net
income (loss) attributable to Key Brand Entertainment
|
(896 | ) | (6,188 | ) | (2,775 | ) | - | - | (5,335 | ) | 1,749 | |||||||||||||||||
Net
Income (Loss) attributable to Key Brand common stockholders per common
share:
|
||||||||||||||||||||||||||||
Basic
|
$ | (1.10 | ) | $ | (7.59 | ) |
nm
|
nm
|
nm
|
$ | (6.55 | ) | $ | 2.15 | ||||||||||||||
Diluted
|
$ | (1.10 | ) | $ | (7.59 | ) |
nm
|
nm
|
nm
|
$ | (6.55 | ) | $ | 1.93 | ||||||||||||||
Weighted
average common shares outstanding (000s):
|
||||||||||||||||||||||||||||
Basic
|
815 | 815 |
nm
|
nm
|
nm
|
815 | 815 | |||||||||||||||||||||
Diluted
|
890 | 905 |
nm
|
nm
|
nm
|
860 | 905 |
Page(s)
|
||||
Independent
Auditors’ Report
|
1 | |||
Financial
Statements
|
||||
Consolidated
Balance Sheets
|
2 | |||
|
||||
Consolidated
Statements of Operations
|
3 | |||
Consolidated
Statements of Comprehensive Income (Loss)
|
4 | |||
Consolidated
Statements of Changes in Stockholders’ Equity
|
5 | |||
Consolidated
Statements of Cash Flows
|
6-7 | |||
Notes
to Consolidated Financial Statements
|
8-31 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 11,620 | $ | 16,156 | ||||
Restricted
cash
|
6,585 | 477 | ||||||
Accounts
receivable, less allowance for doubtful accounts of $1,018 and $1,086 at
December 31, 2009 and 2008, respectively
|
5,464 | 13,816 | ||||||
Receivables
from theatrical partnerships
|
806 | 1,711 | ||||||
Receivables
from related parties
|
745 | 788 | ||||||
Inventory
|
47 | 90 | ||||||
Current
portion of prepaid expenses
|
8,689 | 9,166 | ||||||
Investments
in theatrical partnerships
|
14,114 | 10,115 | ||||||
Current
portion of prepaid theatrical presentation rights and theatre rent
|
822 | 822 | ||||||
Income
tax receivable
|
- | 1,322 | ||||||
Acquisition
escrow deposit
|
1,200 | - | ||||||
Deferred
taxes
|
2,513 | - | ||||||
Other
current assets
|
1,260 | 369 | ||||||
Total
current assets
|
53,865 | 54,832 | ||||||
Property
and equipment
|
||||||||
Land,
buildings, and improvements
|
6,906 | 6,219 | ||||||
Computer
equipment and software
|
5,832 | 931 | ||||||
Furniture
and other equipment
|
809 | 528 | ||||||
Construction
in progress
|
105 | 3,316 | ||||||
13,652 | 10,994 | |||||||
Less
accumulated depreciation
|
(2,880 | ) | (1,090 | ) | ||||
Property
and equipment, net
|
10,772 | 9,904 | ||||||
Goodwill
|
52,340 | 52,340 | ||||||
Intangible
assets, net
|
22,583 | 25,661 | ||||||
Prepaid
expenses, less current portion
|
2,766 | 2,554 | ||||||
Prepaid
theatrical presentation rights and theatre rent, less current portion
|
8,074 | 8,936 | ||||||
Other
assets, net
|
1,292 | 1,102 | ||||||
Deferred
taxes
|
5,644 | 772 | ||||||
Total
assets
|
$ | 157,336 | $ | 156,101 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 15,526 | $ | 26,227 | ||||
Third
party ticket collections payable
|
15,988 | 25,468 | ||||||
Deferred
revenue
|
46,303 | 45,070 | ||||||
Current
portion of revolving credit facility
|
7,000 | - | ||||||
Current
portion of notes payable
|
619 | 931 | ||||||
Current
portion of capital leases
|
1,206 | 591 | ||||||
Deferred
taxes
|
- | 300 | ||||||
Income
tax payable
|
64 | - | ||||||
Put
option to acquire common stock
|
5,578 | 6,944 | ||||||
Total
current liabilities
|
92,284 | 105,531 | ||||||
Deferred
revenue, less current portion and other liabilities
|
3,297 | - | ||||||
Revolving
credit facility, less current portion
|
22,323 | 12,940 | ||||||
Notes
payable, less current portion
|
4,709 | 277 | ||||||
Capital
leases, less current portion
|
1,091 | 1,132 | ||||||
Total
liabilities
|
123,704 | 119,880 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders’
equity
|
||||||||
Series
A convertible preferred stock, $0.001 par value; 95,000
shares authorized; 95,000 shares issued and outstanding
|
- | - | ||||||
Common
stock, no par value; 1,500,000 shares authorized; 815,000 shares issued
and outstanding
|
32,057 | 32,057 | ||||||
Additional
paid-in capital
|
8,821 | 13,677 | ||||||
Accumulated
deficit
|
(9,859 | ) | (8,963 | ) | ||||
Accumulated
other comprehensive income (loss)
|
1,005 | (1,119 | ) | |||||
Total
Key Brand Entertainment Inc. stockholders’ equity
|
32,024 | 35,652 | ||||||
Noncontrolling
interests
|
1,608 | 569 | ||||||
Total
stockholders’ equity
|
33,632 | 36,221 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 157,336 | $ | 156,101 |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Revenue
|
$ | 208,217 | $ | 197,009 | ||||
Operating
expenses
|
||||||||
Direct
operating expenses
|
163,926 | 148,960 | ||||||
Selling,
general and administrative expenses
|
45,326 | 40,540 | ||||||
Depreciation
and amortization
|
4,872 | 4,354 | ||||||
Operating
income (loss)
|
(5,907 | ) | 3,155 | |||||
Other
income (expense)
|
||||||||
Interest
expense, net
|
(1,365 | ) | (4,110 | ) | ||||
Loss
on extinguishment of debt
|
- | (3,729 | ) | |||||
Put
option (expense) credit
|
1,366 | (1,944 | ) | |||||
Foreign
currency transaction gain (loss)
|
(2,649 | ) | 1,213 | |||||
Other
miscellaneous income (expense), net
|
(163 | ) | 50 | |||||
Total
other expense, net
|
(2,811 | ) | (8,520 | ) | ||||
Net
loss before income tax expense
|
(8,718 | ) | (5,365 | ) | ||||
Income
tax expense (benefit)
|
||||||||
Current
|
470 | 150 | ||||||
Deferred
|
(7,685 | ) | 603 | |||||
Income
tax expense (benefit)
|
(7,215 | ) | 753 | |||||
Net
loss
|
(1,503 | ) | (6,118 | ) | ||||
Net
(income) loss attributable to noncontrolling interests
|
607 | (70 | ) | |||||
Net
loss attributable to Key Brand Entertainment Inc.
|
$ | (896 | ) | $ | (6,188 | ) |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Net
loss
|
$ | (1,503 | ) | $ | (6,118 | ) | ||
Foreign
currency translation gain (loss)
|
2,124 | (1,119 | ) | |||||
Comprehensive
income (loss)
|
621 | (7,237 | ) | |||||
Comprehensive
(income) loss attributable to noncontrolling interests
|
607 | (70 | ) | |||||
Comprehensive
income (loss) attributable to Key Brand Entertainment Inc.
|
$ | 1,228 | $ | (7,307 | ) |
Series A Convertible
Preferred Stock
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Accumulated
Other
Comprehensive
Income
|
Total Key
Brand
Entertainment
Inc
Stockholders’,
|
Non-
Controlling
|
Total
Stockholders’
|
|||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
(Loss)
|
Equity
|
Interests
|
Equity
|
|||||||||||||||||||||||||||||||
Balance
at December 31, 2007
|
- | $ | - | - | $ | - | $ | 5,000 | $ | (2,775 | ) | $ | - | $ | 2,225 | $ | - | $ | 2,225 | |||||||||||||||||||||
Issuance
of Series A Convertible Preferred stock, proceeds received in prior year
|
50,000 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Issuance
of Series A Convertible Preferred stock for cash
|
45,000 | - | - | - | 4,500 | - | - | 4,500 | - | 4,500 | ||||||||||||||||||||||||||||||
Issuance
of common stock
|
- | - | 125,000 | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Issuance
of common stock as acquisition consideration
|
- | - | 690,000 | 32,057 | - | - | - | 32,057 | - | 32,057 | ||||||||||||||||||||||||||||||
Issuance
of warrant in conjunction with subordinated loan recorded as debt discount
|
- | - | - | - | 4,177 | - | - | 4,177 | - | 4,177 | ||||||||||||||||||||||||||||||
Foreign
currency translation loss
|
- | - | - | - | - | - | (1,119 | ) | (1,119 | ) | - | (1,119 | ) | |||||||||||||||||||||||||||
Noncontrolling
interests assumed in the acquisition
|
- | - | - | - | - | - | - | - | 695 | 695 | ||||||||||||||||||||||||||||||
Distributions
to noncontrolling interests
|
- | - | - | - | - | - | - | - | (196 | ) | (196 | ) | ||||||||||||||||||||||||||||
Net
income (loss)
|
- | - | - | - | - | (6,188 | ) | - | (6,188 | ) | 70 | (6,118 | ) | |||||||||||||||||||||||||||
Balance
at December 31, 2008
|
95,000 | - | 815,000 | 32,057 | 13,677 | (8,963 | ) | (1,119 | ) | 35,652 | 569 | 36,221 | ||||||||||||||||||||||||||||
Purchase
of warrants
|
- | - | - | - | (5,000 | ) | - | - | (5,000 | ) | - | (5,000 | ) | |||||||||||||||||||||||||||
Foreign
currency translation gain
|
- | - | - | - | - | - | 2,124 | 2,124 | - | 2,124 | ||||||||||||||||||||||||||||||
Amortization
of stock-based compensation-common stock options
|
- | - | - | - | 144 | - | - | 144 | - | 144 | ||||||||||||||||||||||||||||||
Distributions
to noncontrolling interests
|
- | - | - | - | - | - | - | - | (374 | ) | (374 | ) | ||||||||||||||||||||||||||||
Contributions
from noncontrolling interests
|
- | - | - | - | - | - | - | - | 2,020 | 2,020 | ||||||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (896 | ) | - | (896 | ) | (607 | ) | (1,503 | ) | ||||||||||||||||||||||||||
Balance
at December 31, 2009
|
95,000 | $ | - | 815,000 | $ | 32,057 | $ | 8,821 | $ | (9,859 | ) | $ | 1,005 | $ | 32,024 | $ | 1,608 | $ | 33,632 |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (1,503 | ) | $ | (6,118 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities
|
||||||||
Depreciation
|
1,794 | 1,289 | ||||||
Amortization
of intangibles
|
3,078 | 3,065 | ||||||
Amortization
of debt discount and deferred loan costs
|
242 | 1,064 | ||||||
Provision for bad debt
|
(68 | ) | 263 | |||||
Stock-based
compensation
|
144 | - | ||||||
Payment-in-kind
interest
|
109 | - | ||||||
Loss
on extinguishment of debt
|
- | 3,729 | ||||||
Put
option expense (credit)
|
(1,366 | ) | 1,944 | |||||
Impairment
of theatrical investments
|
1,411 | 1,158 | ||||||
Deferred
income taxes
|
(7,685 | ) | 603 | |||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
8,456 | (5,997 | ) | |||||
Receivables
from theatrical partnerships
|
905 | (1,442 | ) | |||||
Receivables
from related parties
|
43 | (768 | ) | |||||
Inventory
|
43 | (85 | ) | |||||
Prepaid
expenses
|
792 | (5,317 | ) | |||||
Prepaid
theatrical presentation rights and theatre rent
|
862 | 690 | ||||||
Acquisition
escrow deposit
|
(1,200 | ) | - | |||||
Other
assets
|
(160 | ) | (590 | ) | ||||
Income
tax receivable, net
|
1,297 | (1,249 | ) | |||||
Accounts
payable and accrued liabilities
|
(10,726 | ) | 11,893 | |||||
Third
party ticket collections payable
|
(9,480 | ) | (1,745 | ) | ||||
Deferred
revenue
|
1,038 | 994 | ||||||
Other
liabilities
|
3,297 | - | ||||||
Net
cash provided by (used in) operating activities
|
(8,677 | ) | 3,381 | |||||
Cash
flows from investing activities
|
||||||||
Acquisition
of Live Nation Theatrical Business, net of cash acquired
|
- | (38,346 | ) | |||||
Increase
in restricted cash
|
(6,108 | ) | (477 | ) | ||||
Investment
in theatrical partnerships
|
(8,546 | ) | (7,712 | ) | ||||
Return
of capital on theatrical partnerships
|
3,136 | 2,477 | ||||||
Purchase
of property and equipment
|
(1,536 | ) | (1,032 | ) | ||||
Proceeds
from disposal of property and equipment
|
- | 33,618 | ||||||
Net
cash used in investing activities
|
(13,054 | ) | (11,472 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds
from borrowings on revolving credit facility
|
16,383 | 12,940 | ||||||
Proceeds
from borrowings on term loan
|
- | 20,000 | ||||||
Proceeds
from borrowings on subordinated loan
|
- | 8,000 | ||||||
Repayment
of term loan
|
- | (20,000 | ) | |||||
Repayment
of subordinated loan
|
- | (18,000 | ) | |||||
Repayment
of notes payable
|
(995 | ) | (341 | ) | ||||
Repayment
of capital leases
|
(550 | ) | - | |||||
Deferred
financing costs
|
(562 | ) | (1,350 | ) | ||||
Issuance
of common stock
|
- | 5,000 |
Year
Ended
December 31, |
||||||||
2009
|
2008
|
|||||||
Issuance of preferred
stock
|
- | 4,500 | ||||||
Contributions from noncontrolling
interests
|
2,020 | - | ||||||
Distributions to noncontrolling
interests
|
(374 | ) | (196 | ) | ||||
Purchase of
warrants
|
(1,000 | ) |
-
|
|||||
Net cash provided by financing
activities
|
14,922 | 10,553 | ||||||
Effect of foreign currency
exchange rates on cash
|
2,273 | (881 | ) | |||||
Net increase (decrease) in
cash
|
(4,536 | ) | 1,581 | |||||
Cash,
beginning of year
|
16,156 | 14,575 | ||||||
Cash,
end of year
|
$ | 11,620 | $ | 16,156 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the year for interest, net of amounts
capitalized
|
$ | 976 | $ | 4,772 | ||||
Cash
paid during the year for taxes
|
$ | 415 | $ | 1,323 | ||||
Non-cash
transactions:
|
||||||||
Capital
leases for office furniture and equipment, computer
|
||||||||
software,
computer equipment, and leasehold improvements
|
$ | 1,124 | $ | 1,722 | ||||
Note
payable issued for software
|
$ | - | $ | 1,107 | ||||
Note
payable to finance insurance premiums
|
$ | 406 | $ | 441 | ||||
Warrant
issued in conjunction with subordinate loan recorded as debt
discount
|
$ | - | $ | 4,177 | ||||
Common
stock issued as acquisition consideration
|
$ | - | $ | 32,057 | ||||
Debt
issued to purchase warrants
|
$ | 4,000 | $ | - | ||||
Debt
issued for deferred financing costs
|
$ | 600 | $ | - |
Buildings
and improvements
|
10
to 40 years
|
|
Furniture
and other equipment
|
3
to 7 years
|
|
Computer
equipment and software
|
2.5
to 5 years
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
·
|
Level
1 – Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.
|
·
|
Level
2 – Valuations based on quoted prices in markets that are not active
and/or for which all significant inputs are observable, either directly or
indirectly.
|
·
|
Level
3 – Valuations based on inputs that are unobservable and significant to
the overall fair value measurement. The inputs used in the determination
of fair value are based upon the best information in the circumstances and
may require significant management judgment or estimation.
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Level 3
|
||||
Balance,
beginning of year
|
$ | 6,944 | ||
Change
in fair value
|
(1,366 | ) | ||
Balance,
end of year
|
$ | 5,578 |
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Working
capital
|
$ | 13,293 | ||
Property
and equipment
|
7,344 | |||
Intangible
assets
|
28,726 | |||
Other
assets
|
9,626 | |||
Goodwill
|
52,340 | |||
Deferred
taxes
|
1,397 | |||
Noncontrolling
interests
|
(695 | ) | ||
Total
purchase price allocation
|
$ | 112,031 |
Trade
name
|
8
to 9 years
|
Presenting
rights
|
8
to 9 years
|
Customer
relationships
|
7
years
|
Venue
operating agreements
|
10
to 16 years
|
Non-compete
agreements
|
6
months
|
Other
|
1
to 4 years
|
|
2009
|
|||||||||||
|
Gross Carrying
Amount
|
Accumulated
Amortization
|
Net
|
|||||||||
|
||||||||||||
Trade
name
|
$ | 4,500 | $ | 1,026 | $ | 3,474 | ||||||
Presenting
rights
|
4,600 | 1,049 | 3,551 | |||||||||
Customer
relationships
|
8,800 | 2,436 | 6,364 | |||||||||
Venue
operating agreements
|
10,400 | 1,316 | 9,084 | |||||||||
Non-compete
agreements
|
180 | 180 | - | |||||||||
Other
|
246 | 136 | 110 | |||||||||
Intangible
assets, net
|
$ | 28,726 | $ | 6,143 | $ | 22,583 |
|
2008
|
|||||||||||
|
Gross Carrying
Amount
|
Accumulated
Amortization
|
Net
|
|||||||||
Trade
name
|
$ | 4,500 | $ | 497 | $ | 4,003 | ||||||
Presenting
rights
|
4,600 | 508 | 4,092 | |||||||||
Customer
relationships
|
8,800 | 1,179 | 7,621 | |||||||||
Venue
operating agreements
|
10,400 | 637 | 9,763 | |||||||||
Non-compete
agreements
|
180 | 180 | - | |||||||||
Other
|
246 | 64 | 182 | |||||||||
Intangible
assets, net
|
$ | 28,726 | $ | 3,065 | $ | 25,661 |
Year
Ended
December 31,
|
||||
2010
|
$ | 3,085 | ||
2011
|
3,038 | |||
2012
|
3,007 | |||
2013
|
3,007 | |||
2014
|
3,007 | |||
Thereafter
|
7,439 | |||
Total
|
$ | 22,583 |
Note
5 -
|
Debt
|
2009
|
2008
|
|||||||
Revolving
credit facility
|
$ | 29,323 | $ | 12,940 | ||||
Notes
payable
|
5,328 | 1,208 | ||||||
Capital
leases
|
2,297 | 1,723 | ||||||
Total
debt
|
36,948 | 15,871 | ||||||
Less:
current maturities
|
(8,825 | ) | (1,522 | ) | ||||
Total
debt, net of current maturities
|
$ | 28,123 | $ | 14,349 |
Note
5 -
|
Debt
(Continued)
|
Note
5 -
|
Debt
(Continued)
|
Note
5 -
|
Debt
(Continued)
|
Year
Ended
December 31,
|
||||
2010
|
$ | 1,212 | ||
2011
|
1,212 | |||
2012
|
11 | |||
Total
|
$ | 2,435 |
Future
minimum lease payments
|
$ | 2,435 | ||
Less
amount representing interest
|
(138 | ) | ||
Total
capital leases payable
|
$ | 2,297 |
Year Ended
December 31,
|
Capital
leases
|
Debt
|
Total
|
|||||||||
2010
|
$ | 1,206 | $ | 7,619 | $ | 8,825 | ||||||
2011
|
1,082 | - | 1,082 | |||||||||
2012
|
9 | 4,709 | 4,718 | |||||||||
2013
|
- | 22,323 | 22,323 | |||||||||
2014
|
- | - | - | |||||||||
Total
|
$ | 2,297 | $ | 34,651 | $ | 36,948 |
Note
5 -
|
Debt
(Continued)
|
2009
|
2008
|
|||||||
Interest
expense
|
$ | 1,123 | $ | 3,743 | ||||
Amortization
of debt discount
|
- | 447 | ||||||
Amortization
of deferred financing costs
|
242 | 619 | ||||||
Interest
income
|
- | (699 | ) | |||||
Total
interest expense, net
|
$ | 1,365 | $ | 4,110 |
Note
6 -
|
Stockholders’
Equity
|
Note
6 -
|
Stockholders’
Equity (Continued)
|
Note
6 -
|
Stockholders’
Equity (Continued)
|
Expected
term (years)
|
6.5 | |||
Expected
volatility
|
45 | % | ||
Expected
annual dividend yield
|
0 | % | ||
Expected
risk-free rate of return
|
3.06 | % |
Options
Outstanding
|
||||||||||||||||
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
(years)
|
Intrinsic
Value
|
|||||||||||||
Balance,
December 31, 2008
|
- | $ | - | - | ||||||||||||
Exercisable,
December 31, 2008
|
- | $ | - | - | ||||||||||||
Granted
|
10,000 | 46.66 | 8.71 | |||||||||||||
Exercised
|
- | - | - | |||||||||||||
Expired
|
- | - | - | |||||||||||||
Balance,
December 31, 2009
|
10,000 | $ | 46.66 | 8.71 | $ | - | ||||||||||
Exercisable,
December 31, 2009
|
5,833 | $ | 46.66 | 8.71 | $ | - |
Note
6 -
|
Stockholders’
Equity (Continued)
|
Number
of
Options
|
Grant
Date
Fair
Value
|
|||||||
Unvested
at December 31, 2008
|
- | $ | - | |||||
Granted
|
10,000 | 22.85 | ||||||
Vested
|
(5,833 | ) | 22.85 | |||||
Unvested
at December 31, 2009
|
4,167 | $ | 22.85 |
Note
6 -
|
Stockholders’
Equity (Continued)
|
Note
7 -
|
Commitments
and Contingencies
|
Year
Ended
December 31,
|
Noncancelable
Operating
Leases
|
Noncancelable
Contracts
|
||||||
2010
|
$ | 1,876 | $ | 759 | ||||
2011
|
1,380 | 309 | ||||||
2012
|
968 | 250 | ||||||
2013
|
637 | 165 | ||||||
2014
|
530 | 165 | ||||||
Thereafter
|
1,005 | 1,379 | ||||||
Total
|
$ | 6,396 | $ | 3,027 |
Note
7 -
|
Commitments
and Contingencies (Continued)
|
Note
8 -
|
Income
Taxes
|
Note
8 -
|
Income
Taxes (Continued)
|
2009
|
2008
|
|||||||||||||||
Current
|
Long-Term
|
Current
|
Long-Term
|
|||||||||||||
Deferred
income tax assets (book deductions in excess of tax)
|
||||||||||||||||
Book
expenses not deductible for tax purposes
|
$ | 2,579 | $ | 1,346 | $ | 1,204 | $ | 1,777 | ||||||||
Net
operating loss and capital loss carryforwards
|
3,047 | 11,898 | 1,451 | 10,445 | ||||||||||||
Foreign
tax credits
|
116 | 1,120 | 1,120 | - | ||||||||||||
Valuation
allowance for deferred tax assets
|
-
|
(7,003 | ) |
-
|
(10,446 | ) | ||||||||||
5,742 | 7,361 | 3,775 | 1,776 | |||||||||||||
Deferred
income tax liabilities (tax deductions in excess of book)
|
(3,229 | ) | (1,717 | ) | (4,075 | ) | (1,004 | ) | ||||||||
Deferred
income tax assets (liabilities), net
|
$ | 2,513 | $ | 5,644 | $ | (300 | ) | $ | 772 |
Note
8 -
|
Income
Taxes (Continued)
|
2009
|
2008
|
|||||||
Current:
|
||||||||
Federal
|
$ | - | $ | - | ||||
State
|
401 | 19 | ||||||
Foreign
|
69 | 131 | ||||||
Total
current
|
470 | 150 | ||||||
Deferred:
|
||||||||
Federal
|
(6,544 | ) | (1,344 | ) | ||||
State
|
(199 | ) | 115 | |||||
Foreign
|
(942 | ) | 1,832 | |||||
Total
deferred
|
(7,685 | ) | 603 | |||||
Total
income tax (benefit) expense
|
$ | (7,215 | ) | $ | 753 |
2009
|
2008
|
|||||||
Income
tax benefit at statutory rates
|
$ | (2,839 | ) | $ | (2,122 | ) | ||
State
income taxes, net of federal tax
|
||||||||
benefit
|
116 | 87 | ||||||
Differences
of foreign taxes from U.S.
|
||||||||
statutory
rates
|
(10 | ) | 147 | |||||
Nondeductible
items
|
(391 | ) | 744 | |||||
Other
permanent differences
|
(648 | ) | 1,897 | |||||
Change
in valuation allowance
|
(3,443 | ) |
-
|
|||||
Total
income tax (benefit) expense
|
$ | (7,215 | ) | $ | 753 |
Note
9 -
|
Related
Party Transactions
|
2009
|
2008
|
|||||||
Booking
and management fees
|
$ | 450 | $ | 530 | ||||
Concessions
and commissions on concessions
|
37 | 105 | ||||||
Consulting
services
|
1,427 | 1,897 | ||||||
General
and administrative expenses
|
144 | 139 | ||||||
Advertising
|
391 | 314 | ||||||
Total
|
$ | 2,449 | $ | 2,985 |
Note
10 -
|
Employee
Benefits
|
Note
11 -
|
Subsequent
Events
|
Note
11 -
|
Subsequent
Events (Continued)
|
Page(s)
|
|
Financial
Statements
|
|
Unaudited
Consolidated Balance Sheets
|
1-2
|
Unaudited
Consolidated Statements of Operations
|
3
|
Consolidated
Statements of Cash Flows
|
4
|
Notes
to Consolidated Financial Statements
|
5-16
|
June
30,
2010
|
December 31,
2009
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 14,902 | $ | 11,620 | ||||
Restricted
cash
|
8,428 | 6,585 | ||||||
Accounts
receivable, less allowance for doubtful accounts of $995 and $1,018 at
June 30, 2010 and December 31, 2009, respectively
|
8,240 | 5,464 | ||||||
Receivables
from theatrical partnerships
|
215 | 806 | ||||||
Receivables
from related parties
|
470 | 745 | ||||||
Inventory
|
39 | 47 | ||||||
Current
portion of prepaid expenses
|
8,944 | 8,689 | ||||||
Investments
in theatrical partnerships
|
12,403 | 14,114 | ||||||
Current
portion of prepaid theatrical presentation rights and theatre rent
|
822 | 822 | ||||||
Acquisition
escrow deposit
|
1,200 | 1,200 | ||||||
Deferred
taxes
|
2,513 | 2,513 | ||||||
Other
current assets
|
2,293 | 1,260 | ||||||
Total
current assets
|
60,469 | 53,865 | ||||||
Property
and equipment
|
||||||||
Land,
buildings, and improvements
|
6,958 | 6,906 | ||||||
Computer
equipment and software
|
5,989 | 5,832 | ||||||
Furniture
and other equipment
|
823 | 809 | ||||||
Construction
in progress
|
179 | 105 | ||||||
13,949 | 13,652 | |||||||
Less
accumulated depreciation
|
(3,952 | ) | (2,880 | ) | ||||
Property
and equipment, net
|
9,997 | 10,772 | ||||||
Goodwill
|
52,340 | 52,340 | ||||||
Intangible
assets, net
|
21,006 | 22,583 | ||||||
Prepaid
expenses, less current portion
|
2,766 | 2,766 | ||||||
Prepaid
theatrical presentation rights and theatre rent, less current portion
|
7,554 | 8,074 | ||||||
Other
assets, net
|
876 | 1,292 | ||||||
Deferred
taxes
|
9,018 | 5,644 | ||||||
Total
assets
|
$ | 164,026 | $ | 157,336 |
June
30,
2010
|
December 31,
2009
|
|||||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 15,816 | $ | 15,526 | ||||
Third
party ticket collections payable
|
33,627 | 15,988 | ||||||
Deferred
revenue
|
45,582 | 46,303 | ||||||
Current
portion of revolving credit facility
|
22,323 | 7,000 | ||||||
Current
portion of notes payable
|
75 | 619 | ||||||
Current
portion of capital leases
|
1,149 | 1,206 | ||||||
Income
tax payable
|
- | 64 | ||||||
Put
option to acquire common stock
|
5,578 | 5,578 | ||||||
Total
current liabilities
|
124,150 | 92,284 | ||||||
Deferred
revenue, less current portion and other liabilities
|
2,671 | 3,297 | ||||||
Revolving
credit facility, less current portion
|
- | 22,323 | ||||||
Notes
payable, less current portion
|
- | 4,709 | ||||||
Capital
leases, less current portion
|
514 | 1,091 | ||||||
Total
liabilities
|
127,335 | 123,704 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders’
equity
|
||||||||
Series
A convertible preferred stock, $0.001 par value; 95,000 shares authorized;
95,000 shares issued and outstanding
|
- | - | ||||||
Common
stock, no par value; 1,500,000 shares authorized; 815,000 shares issued
and outstanding
|
32,057 | 32,057 | ||||||
Additional
paid-in capital
|
13,850 | 8,821 | ||||||
Accumulated
deficit
|
(15,194 | ) | (9,859 | ) | ||||
Accumulated
other comprehensive income
|
1,072 | 1,005 | ||||||
Total
Key Brand Entertainment Inc. stockholders’ equity
|
31,785 | 32,024 | ||||||
Noncontrolling
interests
|
4,906 | 1,608 | ||||||
Total
stockholders’ equity
|
36,691 | 33,632 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 164,026 | $ | 157,336 |
Six
Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Revenue
|
$ | 137,544 | $ | 125,261 | ||||
Operating
expenses
|
||||||||
Direct
operating expenses
|
116,718 | 97,547 | ||||||
Selling,
general and administrative expenses
|
26,235 | 20,749 | ||||||
Depreciation
and amortization
|
2,648 | 1,925 | ||||||
Operating
income (loss)
|
(8,057 | ) | 5,040 | |||||
Other
income (expense)
|
||||||||
Interest
expense, net
|
(567 | ) | (693 | ) | ||||
Foreign
currency transaction loss
|
(107 | ) | (1,122 | ) | ||||
Other
miscellaneous income expense, net
|
(22 | ) | (39 | ) | ||||
Total
other expense, net
|
(696 | ) | (1,854 | ) | ||||
Net
income (loss) before income tax benefit
|
(8,753 | ) | 3,186 | |||||
Income
tax expense (benefit)
|
||||||||
Current
|
166 | 75 | ||||||
Deferred
|
(3,374 | ) | 1,258 | |||||
Income
tax expense (benefit)
|
(3,208 | ) | 1,333 | |||||
Net
income (loss)
|
(5,545 | ) | 1,853 | |||||
Net
(income) loss attributable to noncontrolling interests
|
210 | $ | (104 | ) | ||||
Net
loss attributable to Key Brand Entertainment Inc.
|
$ | (5,335 | ) | $ | 1,749 |
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities
|
||||||||
Net income (loss)
|
$ | (5,545 | ) | $ | 1,853 | |||
Adjustments to reconcile net
income (loss) to net cash
|
||||||||
provided by (used in) operating
activities
|
||||||||
Depreciation
|
1,073 | 387 | ||||||
Amortization
of intangibles
|
1,577 | 1,538 | ||||||
Amortization
of debt discount and deferred loan costs
|
66 | 91 | ||||||
Stock-based
compensation
|
218 | - | ||||||
Impairment
of theatrical investments
|
3,390 | - | ||||||
Deferred
income taxes
|
(3,374 | ) | 1,258 | |||||
Changes in operating assets and
liabilities
|
||||||||
Accounts
receivable
|
(1,910 | ) | (2,291 | ) | ||||
Inventory
|
7 | - | ||||||
Prepaid
expenses
|
349 | 7,215 | ||||||
Other
assets
|
(828 | ) | 500 | |||||
Accounts
payable and accrued liabilities
|
(56 | ) | (22,461 | ) | ||||
Third party
ticket collections payable
|
17,888 | |||||||
Deferred
revenue
|
(722 | ) | 3,818 | |||||
Other
liabilities
|
(493 | ) |
-
|
|||||
Net cash provided by (used in)
operating activities
|
11,640 | (9,350 | ) | |||||
Cash
flows from investing activities
|
||||||||
Increase in restricted cash
|
(1,874 | ) | (4,129 | ) | ||||
Investment in theatrical
partnerships, net of distributions
|
(1,679 | ) | (487 | ) | ||||
Purchase
of property and equipment
|
(50 | ) | (1,273 | ) | ||||
Net cash used in investing
activities
|
(3,603 | ) | (5,889 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds from borrowings on
revolving credit facility
|
- | 8,383 | ||||||
Repayment of revolver
|
(7,000 | ) | - | |||||
Repayment of notes payable
|
(544 | ) | - | |||||
Repayment of capital leases
|
(633 | ) | (626 | ) | ||||
Contributions from noncontrolling
interests
|
4,636 | - | ||||||
Distributions to noncontrolling
interests
|
(1,128 | ) | (142 | ) | ||||
Net cash (used in) provided by
financing activities
|
(4,669 | ) | 7,615 | |||||
Effect of foreign currency
exchange rates on cash
|
(86 | ) | 792 | |||||
Net increase (decrease) in cash
|
3,282 | (6,832 | ) | |||||
Cash,
beginning of year
|
11,620 | 16,156 | ||||||
Cash,
end of year
|
$ | 14,902 | $ | 9,324 |
Note
1 -
|
Summary
of Significant Accounting Policies
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
·
|
Level
1 – Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.
|
·
|
Level
2 – Valuations based on quoted prices in markets that are not active
and/or for which all significant inputs are observable, either directly or
indirectly.
|
·
|
Level
3 – Valuations based on inputs that are unobservable and significant to
the overall fair value measurement. The inputs used in the determination
of fair value are based upon the best information in the circumstances and
may require significant management judgment or estimation.
|
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Level
3
|
||||
Balance,
December 31, 2009
|
$ | 5,578 | ||
Change
in fair value
|
-
|
|||
Balance,
June 30, 2010
|
$ | 5,578 |
Note
1 -
|
Summary
of Significant Accounting Policies (Continued)
|
Note
2 -
|
Debt
|
June 30,
2010
|
December
31, 2009
|
|||||||
Revolving
credit facility
|
$ | 22,323 | $ | 29,323 | ||||
Notes
payable
|
75 | 5,328 | ||||||
Capital
leases
|
1,663 | 2,297 | ||||||
Total
debt
|
24,061 | 36,948 | ||||||
Less:
current maturities
|
(23,547 | ) | (8,825 | ) | ||||
Total
debt, net of current maturities
|
$ | 514 | $ | 28,123 |
Note
2 -
|
Debt
(Continued)
|
Note
2 -
|
Debt
(Continued)
|
Note
2 -
|
Debt
(Continued)
|
Year
Ended
June 30,
|
||||
2011
|
$ | 1,162 | ||
2012
|
573 | |||
2013
|
-
|
|||
Total
|
$ | 1,735 |
Future
minimum lease payments
|
$ | 1,735 | ||
Less
amount representing interest
|
(72 | ) | ||
Total
capital leases payable
|
$ | 1,663 |
Year Ended
June 30,
|
Capital
leases
|
Debt
|
Total
|
|||||||||
2011
|
$ | 1,149 | $ | 22,398 | $ | 23,547 | ||||||
2012
|
514 | - | 514 | |||||||||
2013
|
- | - | - | |||||||||
2014
|
- | - | - | |||||||||
2015
|
- | - | - | |||||||||
Total
|
$ | 1,663 | $ | 22,398 | $ | 24,061 |
Note
2 -
|
Debt
(Continued)
|
2010
|
2009
|
|||||||
Interest
expense
|
$ | 529 | $ | 753 | ||||
Amortization
of deferred financing costs
|
91 | 91 | ||||||
Interest
income
|
(53 | ) | ( 151 | ) | ||||
Total
interest expense, net
|
$ | 567 | $ | 693 |
Note
3 -
|
Income
Taxes
|
Note
3 -
|
Income
Taxes (Continued)
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
Current
|
Long-Term
|
Current
|
Long-Term
|
|||||||||||||
Deferred
income tax assets (book deductions in excess of tax)
|
||||||||||||||||
Book
expenses not deductible for tax purposes
|
$ | 2,579 | $ | 1,346 | $ | 2,579 | $ | 1,346 | ||||||||
Net
operating loss and capital loss carryforwards
|
3,047 | 15,273 | 3,047 | 11,898 | ||||||||||||
Foreign
tax credits
|
116 | 1,120 | 116 | 1,120 | ||||||||||||
Valuation
allowance for deferred tax assets
|
-
|
(7,003 | ) |
-
|
(7,003 | ) | ||||||||||
5,742 | 10,736 | 5,742 | 7,361 | |||||||||||||
Deferred
income tax liabilities (tax deductions in excess of book)
|
(3,229 | ) | (1,718 | ) | (3,229 | ) | (1,717 | ) | ||||||||
Deferred
income tax assets (liabilities), net
|
$ | 2,513 | $ | 9,018 | $ | 2,513 | $ | 5,644 |
Note
3 -
|
Income
Taxes (Continued)
|
2010
|
2009
|
|||||||
Current:
|
||||||||
Federal
|
$ | - | $ | - | ||||
State
|
90 | 10 | ||||||
Foreign
|
76 | 65 | ||||||
Total
current
|
166 | 75 | ||||||
Deferred:
|
||||||||
Federal/Foreign
|
(2,990 | ) | 1,115 | |||||
State
|
(384 | ) | 143 | |||||
Total
deferred
|
(3,374 | ) | 1,258 | |||||
Total
income tax benefit
|
$ | (3,208 | ) | $ | 1,333 |
2010
|
2009
|
|||||||
Income
tax benefit at statutory rates
|
$ | (2,990 | ) | $ | 1,114 | |||
State
income taxes, net of federal tax
|
||||||||
Benefit
|
(294 | ) | 153 | |||||
Other
permanent differences
|
76 | 66 | ||||||
Total
income tax benefit
|
$ | (3,208 | ) | $ | 1,333 |
Note
4 -
|
Subsequent
Events
|
Note
4 -
|
Subsequent
Events (Continued)
|
PROPOSAL #1, THE PROPOSAL TO
SELL THEATRE DIRECT:
To
approve the sale of all of the outstanding capital stock of Theatre Direct
NY, Inc., a wholly-owned subsidiary of Hollywood Media Corp., to Key Brand
Entertainment Inc. as contemplated by the Stock Purchase Agreement, dated
December 22, 2009, as amended, between Hollywood Media Corp. and Key Brand
Entertainment Inc., as described in the notice of special meeting and
proxy statement.
|
||
¨ FOR
|
¨ AGAINST
|
¨ ABSTAIN
|
PROPOSAL #2, THE PROPOSAL TO
ADJOURN OR POSTPONE THE SPECIAL MEETING:
To
approve the adjournment or postponement of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve Proposal
#1, the Proposal to Sell Theatre Direct.
|
||
¨ FOR
|
¨ AGAINST
|
¨ ABSTAIN
|
The
undersigned hereby acknowledges receipt of the Notice of Special Meeting
and Proxy Statement for Hollywood Media Corp.’s Special Meeting of
Shareholders to be held on [___], 2010.
|
PLEASE
MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
|
New
Address:
|
||
To
change the address on your account, please check the box at right and
indicate
your new address in the address space above. Please note that
changes
to the registered name(s) on the account may not be submitted via
this method.
|
£
|
|
Signature
of Shareholder:
________________________________________ Date:
______________________
Signature
of Shareholder:
________________________________________ Date:
______________________
|
||
Note:
Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing as
executor, administrator,
attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving
full title as such. If signer is a partnership, please sign in partnership
name by authorized person.
|