-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LcD+Ztaczasir7Io3mWcu4ynfspWk0PqIbmjDl6+krJ/zKRXRjoMfefVMgD6wdhg SoMxlyhYXfuJiYCmatzr9w== 0000909518-05-000686.txt : 20060828 0000909518-05-000686.hdr.sgml : 20060828 20050824171143 ACCESSION NUMBER: 0000909518-05-000686 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20050824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD MEDIA CORP CENTRAL INDEX KEY: 0000912544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 650385686 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 2255 GLADES RD STREET 2: STE 237 W CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5619988000 MAIL ADDRESS: STREET 1: 2255 GLADES RD STREET 2: STE 237 W CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: HOLLYWOOD COM INC DATE OF NAME CHANGE: 20000511 FORMER COMPANY: FORMER CONFORMED NAME: BIG ENTERTAINMENT INC DATE OF NAME CHANGE: 19930924 CORRESP 1 filename1.txt WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 August 24, 2005 TRANSMITTED VIA EDGAR: - --------------------- Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: Michael Moran, Accounting Branch Chief Re: Hollywood Media Corp. Form 10-K for the year ended December 31, 2004 Filed March 31, 2005 File No. 1-14332 Ladies and Gentlemen: We are writing on behalf of our client, Hollywood Media Corp. (the "Company"), to respond to the comments of the Staff set forth in the letter dated June 15, 2005 with respect to the above-referenced Form 10-K. For your convenience, each comment from the comment letter is repeated here, followed by the Company's response and the paragraph numbering below corresponds to the numbering in the comment letter. COVER - ----- 1. OUR RECORDS SHOW YOUR FILE NUMBER IS 1-14332, RATHER THAN FILE NUMBER 0-22908 THAT APPEARS ON THE COVER PAGES OF YOUR FORMS 10-K, 10-K/A, 10-Q, NT 10-Q, DEF 14A AND 8-K. PLEASE MAKE THE APPROPRIATE REVISIONS. We note that the Company's EDGAR filings are indeed filed under the proper number in the EDGAR database (File Number 1-14332), although we recognized as you noted that the number on the cover pages (Number 0-22908) is a number that was previously assigned to the Company when it went public. As per conversations with the EDGAR staff, the Company has agreed to use File Number 1-14332 on the cover pages of its filings. Because of the large number of past filings using the old file number on the cover page, the Company requests that it be permitted to use the new file number on its future filings and not amend its prior filings. The Company hereby undertakes to use File Number 1-14332 on all future filings. NY2:\1544589\12\X3T912!.DOC\26141.0003 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATION, PAGE 20 NET REVENUES, PAGE 24 - ------------------------------------------- 2. WE DO NOT UNDERSTAND WHY YOU HAVE RECORDED $993,917 IN NON-CASH REVENUES AND EXPENSES IN CONNECTION WITH THE NATO CONTRACT WHICH IS NO LONGER IN EFFECT. PLEASE TELL US WHEN THE CONTRACT TERMINATED AND THE CIRCUMSTANCES FOR RECOGNITION OF INCOME AND EXPENSE AFTER THE CONTRACTUAL PERIOD. As indicated in the Company's Form 10-K, the annual NATO revenue and expense each amounted to $2,981,750 per year, which equates to a monthly accrual of $248,479. The contract, as stated on page 24 of the Company's Form 10-K, expired in April 2002. The $993,917 of non-cash revenues and expenses recorded in 2002 equates to 4 months at $248,479 per month. No revenue or expense was recorded after the expiration of the contract. AUDIT FEES AND OTHER, PAGE 35 - ----------------------------- 3. TELL US THE NATURE OF THE INCREASE IN AUDIT, REVIEW AND CONSULTING FEES IN FISCAL 2004. FEES ASSOCIATED WITH THE AUDIT OR REVIEW OF YOUR FINANCIAL STATEMENTS SHOULD BE DISCLOSED AS AUDIT FEES WHILE FEES RELATED TO INTERNAL CONTROL REVIEW AND COMPLIANCE ARE REQUIRED TO BE DISCLOSED AS AUDIT RELATED FEES. SEE ITEM 9(E)(1) OF SCHEDULE 14A. PLEASE ADVISE OR REVISE YOUR DISCLOSURES ON PAGES 29 AND 35 OF FORM 10-K AND THE DEFINITIVE SCHEDULE 14A FILED ON APRIL 29, 2005. The increase in audit fees in fiscal 2004 resulted from our Independent Registered Public Accounting Firm, Ernst & Young LLP, incurring substantially more hours in fiscal 2004 than in fiscal 2003 as a result of the audit of management's assessment of internal control over financial reporting and the audit of the Company's internal control over financial reporting in compliance with the Sarbanes-Oxley Act of 2002. In addition, the Ernst & Young billing rate per hour increased in fiscal 2004 as compared to fiscal 2003. As per our conversation with the Staff, the fees of the Company's Independent Registered Public Accounting Firm included under "Audit Fees" that relate to internal controls are solely for the audit of management's assessment of internal control over financial reporting and the audit of the Company's internal control over financial reporting and other regulatory matters related to compliance with the Sarbanes-Oxley Act of 2002. No fees of the Company's Independent Registered Public Accounting Firm relating to internal control reviews are included under "Audit Fees." Accordingly, the Company believes that it properly disclosed the fees of its Independent Registered Public Accounting Firm and, therefore, no amendment to the Company's Form 10-K or the Definitive Schedule 14A is necessary. The Company believes this presentation is supported by Release No. 333-8183 (FR-68). 2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, PAGE 42 - ------------------------------------------------------- 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, PAGE 44 - ------------------------------------------------------- 401(K) PLAN, PAGE 50 - -------------------- 4. WE NOTE THAT YOU CONTRIBUTE COMMON SHARES TO YOUR 401(K) SAVINGS PLAN. PLEASE TELL US WHY YOU HAVE NOT FILED A FORM 11-K FOR YOUR 401(K) SAVINGS PLAN. SEE REGULATION 15(D) OF THE EXCHANGE ACT. With respect to the Company's contributions of its common shares to the Company's 401(k) Retirement Savings Plan, we note that the plan is a noncontributory plan as further explained below. Participants in the plan are not permitted to use their discretionary employee contributions in the plan to invest in the Company's common shares (or any other securities of the Company). Under the plan, the Company has the discretion to match employee contributions. If the Company determines in any particular year to match employee contributions, the Company has the option, at its discretion, to make the Company's matching contributions in the form of Company common shares. The plan does not permit any portion of employee contributions to be used to purchase Company common shares. In accordance with the Commission's policies set out in no-action letters, since participants are not permitted under the plan to invest any portion of their contributions in Company securities, no plan interests are created which would be considered securities (due to the exemption under Section 3(a)(2) of the Securities Act of 1933, as amended) and, accordingly, the plan is not required to be registered and no Form 11-K for the plan is required. 5. ACQUISITIONS AND OTHER CAPITAL TRANSACTIONS, PAGE 55 - -------------------------------------------------------- 5. PLEASE TELL US THE RESULTS OF YOUR INDEPENDENT VALUATION AND ALLOCATION OF $4.1 MILLION OF EXCESS PURCHASE PRICE CONSIDERATION TO GOODWILL AND OTHER DEFINITE LIVED INTANGIBLE ASSETS IN CONNECTION WITH THE ACQUISITION OF STUDIO SYSTEMS, INC. The acquisition closed on July 1, 2004. The Company engaged a valuation firm which completed its work prior to the filing of the Company's Form 10-Q report for the second quarter of 2005. The valuation firm determined the fair market value of certain identifiable intangible assets (customer lists, non-competition agreements and trademarks), which are being amortized over 3 years, as $670,099. Tangible assets were determined to be valued at an amount approximating their pre-acquisition book value. The remainder of the purchase price of $4,051,992 was allocated to goodwill. 9. GOODWILL AND INTANGIBLES, PAGE 59 - ------------------------------------- 6. PLEASE TELL US THE RESULTS OF YOUR ANNUAL GOODWILL IMPAIRMENT ANALYSIS FOR YOUR INTERNET AD SALES REPORTING SEGMENT. IN YOUR RESPONSE INCLUDE YOUR CALCULATION OF THE REPORTING UNIT'S ESTIMATED FAIR VALUE, THE METHODOLOGY USED TO ASSIGN ASSETS AND LIABILITIES TO THE CARRYING VALUE OF THE REPORTING UNIT AND THE RESULTS WHEN COMPARING THE ESTIMATED FAIR VALUE TO THE CARRYING VALUE OF THE REPORTING UNIT. TELL US WHY THE BASIS USED TO MEASURE FAIR VALUE IS THE MOST APPROPRIATE IN ESTIMATING THE REPORTING UNIT'S FAIR VALUE. WE MAY HAVE FURTHER COMMENTS. After performance of an independent appraisal of the Internet Ad Sales Reporting Segment ("IAS"), it was determined that there was no impairment of goodwill. To determine the value of IAS, the independent appraiser reviewed three approaches to value, the Market, Asset and 3 Income Approaches. Since IAS is a going concern and is not asset-intensive, the independent appraiser ultimately did not use the Asset approach. The calculations for the Market and Income Approaches are summarized below: Value Weighting Total ----- --------- ----- MARKET Value based on Comparable Mergers & $59,735,130 40% $23,894,052 Acquisitions INCOME Value based on Discounted Cash Flow $14,151,040 60% $8,490,624 ---- ----------- 100% $32,384,676 ==== ===========
The Independent Appraiser applied weighting of 40% to the Mergers & Acquisitions and 60% to the Discounted Cash Flow values. The Mergers & Acquisitions result is an indicator of the values as of the valuation date (October 1, 2004) being placed on companies in the marketplace that are similar to IAS and the Discounted Cash Flow directly correlates to the future cash flows anticipated for IAS. The independent appraiser placed a higher weighting on the Discounted Cash Flow value since, in the appraiser's view, an arm's-length buyer would likely consider the Discounted Cash Flow value with greater weight than the Mergers & Acquisitions result. Set out below is an analysis of the fair value of total assets of IAS compared to the book value of its total assets as of October 1, 2004 (the "Valuation Date"): Internet Ad Sales Reporting Segment ----------------------------------- --------------------------------------------------- --------------------- (millions) --------------------------------------------------- --------------------- Total value $ 32.4 --------------------------------------------------- --------------------- Add: Current liabilities (excluding interest bearing debt) 1.4 --------------------------------------------------- --------------------- Fair value of total assets $ 33.8 --------------------------------------------------- --------------------- Book value of total assets $ 23.4 ------- --------------------------------------------------- --------------------- Excess of fair value over book value $ 10.4 ======= --------------------------------------------------- ---------------------
Based upon the above analysis, no impairment exists for IAS at the Valuation Date. 4 11. DEBT, PAGE 60 - ------------------ CEO COMMITMENTS, PAGE 61 - ------------------------ 7. PLEASE TELL US AND DISCLOSE IN FUTURE FILINGS THE AMOUNT, IF ANY, OF OUTSTANDING OBLIGATIONS UNDER THE COMMITMENT OF THE CEO AND VICE-CHAIRMAN AND PRESIDENT AS OF YOUR MOST RECENT BALANCE SHEET DATE. The outstanding loan balance was zero as of December 31, 2004 and March 31, 2005. As requested, the Company will include the outstanding balance of the commitment as of the most recent balance sheet date in future filings. 14. OFFERING OF SECURITIES, PAGE 64 - ------------------------------------ 8. PLEASE TELL US HOW YOU DETERMINED $2.3 MILLION OF ESTIMATED FAIR VALUE IN CANCELLED OPTIONS IS EQUAL TO THE FAIR VALUE OF 520,682 SHARES OF RESTRICTED COMMON STOCK ISSUED ON JANUARY 2, 2002 CONSIDERING THE CLOSING PRICE OF YOUR COMMON STOCK WAS $6.19 PER SHARE ON THAT DATE. The $2,280,587 value was determined based on the $4.38 closing market price per share on the date of the Exchange Agreement, December 14, 2001. In addition, the required Board approval was obtained on the same date. The accounting justification for using December 14, 2001 as the measurement date was that as of that date the fair value of the options had been determined and all items necessary to establish a measurement date were met in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In future filings with this disclosure, the Company will include both the stock issuance date and the measurement date in order to provide the necessary computational information, as applicable. 9. PLEASE TELL US HOW YOU ACCOUNTED FOR THE AMENDED EXERCISE PRICE OF THE SERIES A WARRANT FROM $6.44 PER SHARE TO $5.25 PER SHARE. No accounting recognition was given to the amended exercise price of the Series A warrants. The fair value of the Series A warrants issued to three investors in connection with the Company's May 2001 sales of common stock, and the subsequent adjustment referred to in the comment, were not separately accounted for (i.e., their value was included in additional paid in capital). 10. TELL US HOW YOU ACCOUNTED FOR THE ISSUANCE OF THE COMMON STOCK AND WARRANTS ON FEBRUARY 13, 2004. IT APPEARS YOUR COMMON STOCK WAS TRADING AT A VALUE OF $3.21 ON THE DATE OF ISSUANCE. The common stock and warrants issued on February 13, 2004 were sold pursuant to a purchase agreement dated February 9, 2004. The purchase price of the common stock and warrants, and the other terms of the sale, including the warrant exercise price, were determined pursuant to arms-length negotiations between the Company and the independent third party purchasers, and the pricing for the shares, the warrants and the warrant exercise price were determined consistent with the Nasdaq "at-market" requirements and calculated based on the average of the closing bid price reported for the Company's common stock on the Nasdaq National Market System for the five business days prior to the date of the purchase agreement (February 9, 2004). The Company received no other consideration or services for the sale of these securities. 5 In the future, when disclosing securities transaction of this nature, the Company will include the date of the purchase agreement (i.e., the measurement date for accounting purposes on which the pricing calculations are made), as well as the date of the issuance of the securities. ITEM 9A. CONTROLS AND PROCEDURES, PAGE 83 - ------------------------------------------ 11. REVISE TO PROVIDE THE INFORMATION REQUIRED BY ITEM 304(A)(1)(V) OF REGULATION S-K, REGARDING ANY REPORTABLE EVENT (I.E. INTERNAL CONTROL WEAKNESS, ETC.) THE FORMER ACCOUNTANT ADVISED THE COMPANY OF DURING THE TWO MOST RECENT FISCAL YEARS AND SUBSEQUENT INTERIM PERIOD THROUGH THE DATE OF TERMINATION. As discussed with the Staff, the information required by S-K Item 304(a)(1)(v) of Regulation S-K was included in the Company's Form 8-Ks filed on May 10, 2005 and May 20, 2005. Accordingly, the Company believes that it has already provided the required information. DESCRIBE IN DETAIL THE NATURE OF EACH MATERIAL WEAKNESS AND THE AMOUNTS INVOLVED, AS APPLICABLE. A comprehensive description of the Company's material weaknesses and the specifics of the deficiencies discovered are included in Item 9A of the Company's Form 10-K/A filed with the Commission on May 2, 2005. Please refer to Exhibit 1 attached hereto for a detailed listing of adjustments and corresponding amounts. ALSO, TELL US: O IN WHAT PERIOD EACH MATERIAL WEAKNESS AND ACCOUNTING ERROR OR MISAPPLICATION OF GAAP OCCURRED; The Company and its Independent Registered Public Accountant performed the testing of the internal control processes for 2004 in the fourth quarter of 2004 and the first quarter of 2005 for purposes of the reports on internal controls required by the Sarbanes-Oxley Act, and the material weaknesses identified in such testing were identified as of the end of 2004. The accounting errors and misapplications of GAAP resulting from the material weaknesses affected prior periods in two areas: (1) gross vs. net recording of ad sales sold with agency commissions and (2) reclassification adjustments associated with the recording of vendor rebates as a reduction to costs of sales instead of revenue. The period and effect of these items on revenue, cost of sales and SG&A has been provided in Exhibit 2 attached hereto. O THE AMOUNT OF EACH ACCOUNTING ERROR AND MISAPPLICATION OF GAAP; The accounting errors and misapplications of GAAP for the period, including all audit adjustments, have been provided in Exhibit 1 attached hereto. 6 O THE REASONS FOR EACH ERROR OR MISAPPLICATION OF ACCOUNTING; The errors and/or misapplications of accounting were due to the material weaknesses disclosed in the Company's Form 10-K, as amended by the Company's Form 10-K/A. Included in Item 9A of the Company's Form 10-K/A is the most comprehensive description of the Company's material weaknesses and the specifics of the deficiencies discovered, including the nature of the control breakdown (i.e. design deficiency, etc). O WHETHER OR NOT YOU INTEND TO RESTATE ANY PRIOR PERIOD FOR ANY ADJUSTMENTS. IF NOT, TELL US WHY NOT; AND The Company does not intend to restate any prior period for any adjustments. The Company has performed a quantitative and qualitative analysis in accordance with the applicable standards on the determination of materiality. The Company's quantitative analysis noted that the errors in accounting would not result in any change to net loss for any prior period. The effects from a quantitative perspective have been presented in Exhibit 2 (attached) to show the impact on financial statement captions presented in the Company's Form 10-K, as amended. The Company then performed a qualitative analysis noting the changes would have no impact on existing contracts, debentures, or other matters of this nature. Therefore, the Company determined that due to the immateriality, from both a quantitative and qualitative perspective, the Company did not need to restate its previously issued financial statements. O IN DETAIL, ALL THE STEPS YOU HAVE TAKEN (OR PLAN TO TAKE) AND PROCEDURES YOU HAVE IMPLEMENTED (OR PLAN TO IMPLEMENT) TO CORRECT EACH CONCERN. The Company's management is in the process of remediating the weaknesses in the Company's system of internal control over financial reporting which were identified by management and described in Item 9A of the Company's Form 10-K/A. The Company's management believes that the remediations described below, when completed, will mitigate the material weaknesses identified by management. The corrective steps that management has already taken and those that it is in the process of taking are outlined below the material weakness to which they apply as follows: 1) Entity Level Controls --------------------- (i) Executive management of the Company has re-emphasized the importance of internal controls to all of its management-level employees and has launched a structured process to address deficiencies and to implement improvements to internal controls by setting up an internal compliance team that is remediating the Company's material weaknesses. The Company also plans to establish an internal audit department. A Delegation of Authority matrix has been prepared by executive management, which specifies and communicates all authorities delegated by the Board of Directors to the Chief Executive Officer, other officers, Presidents, Vice Presidents and departmental management. A further review of the Segregation of Duties matrix is being performed to ensure adequate segregation of duties and that process documentation is complete. The Company has added additional skilled in-house accountants, including the appointment of a Controller at its Broadway ticketing division in New York. 7 (ii) Bi-weekly risk assessment meetings began during the fourth quarter of 2004 and are held with executive officers, division heads and representatives of the Company's human resource, information systems, ad sales, business development and legal departments to identify and discuss known business or financial risks and to develop timely responses to such risks. In December 2004, the Company established a whistleblower hotline for employees to report concerns regarding any improper matters to the Audit Committee. The Company has successfully tested the hotline system. Management has retained personnel with extensive public company and public accounting experience to review documents to be filed publicly, assist with the identification of financial reporting risks, and assist with financial reporting in response to any changes in the Company's operations. (iii) Various policies and procedures to improve controls have been developed and are being implemented as a result of management's assessment of internal controls, and are being incorporated into the training of employees and maintained in a centralized databank. (iv) The Company has licensed and is now in the process of implementing a new general ledger system for the Company and its subsidiaries. The installation of this system and training in its use is expected to be completed by October 1, 2005. This general ledger system will automate several processes that are currently being performed manually by the Company's accounting staff, including payroll functions, cash reconciliations, fixed asset management and intercompany accounting. This system also includes a purchase order function that will introduce additional controls over the approval of procurement transactions. In addition, after extensive review and analysis, the Company's management has identified a more robust ticketing software system to replace its existing system and to improve the accuracy and timeliness of reporting of the financial statements and information for the Broadway ticketing division and is in the process of testing, licensing and installing this new ticketing software system. (v) As described in paragraph (1)(i) above, additional skilled accounting personnel have been hired to improve staffing and monitoring of internal controls. As also described in paragraph (1)(i) above, the Company is in the process of establishing an internal audit team assigned to evaluate internal controls and facilitate remediation of identified control deficiencies. 2) Financial Statement Close Process --------------------------------- As noted above in paragraph (1)(iv), the Company has licensed and is now in the process of installing a new general ledger system, which will automate several processes that are currently being performed manually by the Company's accounting staff, including payroll functions, cash reconciliations, fixed asset management and intercompany accounting, and will include a purchase order function that will introduce additional controls over the 8 approval of procurement transactions. Existing closing checklists and closing calendars are being consolidated to ensure a comprehensive review process and to facilitate a smooth general ledger system implementation. Further, the more robust ticketing software system that will replace the Company's existing system will improve the accuracy and timeliness of reporting of the financial information of the Broadway ticketing division. As also noted above, the Company has added additional skilled accountants, including a new Controller for its Broadway ticketing division in New York. This new Controller is responsible for implementing compensating controls prior to the launch of the new ticketing system in order to improve financial reporting in the interim period. The addition of such accounting personnel, coupled with the new general ledger system and ticketing software system, is expected to significantly improve the financial statement close process. 3) Broadway Ticketing Division --------------------------- In order to correct inadequate controls over the recording, review and reporting of ticketing-related financial information, the Company's management has: (i) Identified and is in the process of testing, licensing and installing a more robust ticketing software system as noted in paragraph (1)(iv) above; and (ii) As noted in paragraphs (1)(i) and (2) above, the Company has added a new Controller for its Broadway ticketing division whose responsibility includes implementing compensating controls prior to the launch of the new ticketing system in order to improve financial reporting in the interim period. 4) Accounting for Internally Developed Software Costs -------------------------------------------------- To properly account for internally developed software, the Company has licensed and is implementing a new project management software system that will facilitate improved maintenance of employee time reports and project documentation. This software is in addition to the general ledger software which also has been licensed by the Company and is in the process of being installed and implemented as described in paragraph (1)(iv) above. 5) Accounting for Income Taxes --------------------------- The Company's accounting department is responsible for compiling and summarizing financial information for completion of income tax preparation by a third party accounting firm specializing in tax matters which has been retained by the Company. The Chief Accounting Officer of the Company reviews such preparation in preparing financial statements and related calculations and disclosures regarding income taxes, including deferred assets and liabilities. 6) Combination of Significant Deficiencies --------------------------------------- As noted above, the Company's management believes that the remediations described above, when completed, will mitigate the material weaknesses identified by management, including remediation of the significant deficiencies described in the Company's Form 10-K/A. In addition to the corrective steps 9 described above, including the installation of a new general ledger system described above, the Company also notes that it is re-engineering certain procedures to address these deficiencies, including re-engineering the accounts payable process to take advantage of the purchase order functionality of the new general ledger system, which will result in control improvements in the purchase and pay process, improved identification of commitments and contingencies, and improvement in the financial statement close process. In other procedures, the Company is segregating the accounting entry routines from the review process and consolidating month-end checklists to facilitate improved and independent review of the accounting processes. PLEASE PROVIDE US WITH A SCHEDULE OF YOUR FISCAL YEAR END FOURTH QUARTER ADJUSTMENTS TO CLOSE THE BOOKS, OR ADJUSTMENTS RECORDED IN CONNECTION WITH OR AS A RESULT OF THE AUDIT. CLEARLY EXPLAIN THE REASON FOR EACH ADJUSTMENT. FOR EACH ADJUSTMENT, SHOW US THE IMPACT ON PRE-TAX NET LOSS. QUANTIFY THE NET EFFECT OF ALL ADJUSTMENTS ON PRE-TAX NET INCOME (LOSS). ALSO, TELL US WHY NONE OF THE ADJUSTMENTS RELATE TO PRIOR PERIOD. EXPLAIN IN DETAIL WHY YOU BELIEVE THE TIMING OF EACH ADJUSTMENT IS APPROPRIATE. A schedule of the Company's 2004 fiscal year end fourth quarter adjustments to close the books and adjustments recorded in connection with or as a result of the audit is attached hereto as Exhibit 1. The Company has provided descriptions for each adjustment, the impact on pre-tax net loss and calculated the net effect of all adjustments on pre-tax loss. The only two areas impacting prior periods are described above in response to the fourth bullet point of the Staff's Comment No. 11, and as described above the Company determined that due to the immateriality the Company did not need to restate its previously issued financial statements. Provided in Exhibit 2 (attached) is a detailed period analysis that calculates the effect on financial statement captions and net loss. PROVIDE US WITH ANY LETTER OR WRITTEN COMMUNICATION TO AND FROM THE FORMER ACCOUNTANTS REGARDING ANY DISAGREEMENTS OR REPORTABLE EVENTS TO MANAGEMENT OR THE AUDIT COMMITTEE. With respect to the request to provide any letter or written communication to and from the former accountants regarding any disagreements or reportable events to management or the Audit Committee, as discussed with the Staff, the Company did not have any disagreements with the former auditors. Accordingly, there is no written communication regarding disagreements. The Company reported in its Form 8-K filed on May 10, 2005 that there were no disagreements with the former accountants and filed as Exhibit 16.1 to the Form 8-K a letter from the former accountants agreeing with that statement. With respect to reportable events, as discussed with the Staff, the Company has disclosed the reportable events in its May 10, 2005 Form 8-K and filed as Exhibit 16.1 to the Form 8-K a letter from the former accountants agreeing with the Company's disclosure. In addition, a copy of the former accountants' report on the Company's internal control over financial reporting that was addressed to the Company's board of directors and shareholders is included in Item 9A of the Company's Form 10-K/A. Accordingly, the Company believes all required information has been disclosed. Attached hereto please find the requested acknowledgments of the Company. 10 If the Staff has any additional questions or comments, kindly contact the undersigned at (212) 310-8482. Very truly yours, /s/ David G. Schwartz cc: Mitchell Rubenstein, Hollywood Media Corp. 11 Hollywood Media Corp. 2255 Glades Road Suit 221A Boca Raton, FL 33431 Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Please be advised that Hollywood Media Corp. (the "Company") hereby acknowledges that (i) the Company is responsible for the adequacy and accuracy of the disclosure in its filings with the Commission; (ii) the staff comments or changes to disclosure in response to the staff comments do not foreclose the Commission from taking any action with respect to the filings with the Commission; and (iii) the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Dated: August 24, 2005 HOLLYWOOD MEDIA CORP. By: /s/ Mitchell Rubenstein --------------------------------------- Name: Mitchell Rubenstein Title: Chairman and Chief Executive Officer Exhibit 1
------------------------------------------------------ Debit / (Credit) ------------------------------------------------------ ACCOUNT DESCRIPTION Current Long-term Current RECORDED ENTRIES assets assets liabilities 1 Inventories 449,779 - 449,779 COS-Tickets - 145,408 Accrued Expenses - 304,371 (304,371) To accrue weekendings, hotel costs and restaurant vouchers. 2 Fixed Assets -Software 152,381 - 152,381 Prepaid - Others - 152,381 (152,381) To reclass deferred project costs initially booked as prepaid. 3 Revenues 80,741 - Accounts Receivable 18,421 - 18,421 Depreciation and Amortization Expense 3,083 - SG&A 49,586 Salaries and benefits 111,050 - Intangible Asset 408,826 - 408,826 Paid-in Capital 23,779 - Accumulated Depreciation 26,231 - 26,231 Fixed Assets - 204,414 (204,414) Goodwill - 479,163 (479,163) Accrued Expenses - 8,826 (8,826) Accumulated Amortization - 29,314 (29,314) To adjust opening balance sheet for SSI, FRM and GTI acquisitions. 4 Deferred Revenue-Future Performance 34,650 - 34,650 Ticket Sales 34,650 To properly state deferred sellables ( hotel) 5 Deferred Revenue-Future Performance 13,682 - 13,682 Ticket Sales 26,318 - Customer Deposits/Refunds - 40,000 (40,000) To adjust for excess service charge 6 Consulting Fees 20,664 - Paid in Capital - 20,664 To properly recognize expense from consultant equity award. 7 Hotel/Travel Package Income 21,315 - Deferred Rev -Hotel Package - 21,315 (21,315) To adjust hotel packages 8 Inventory-Future Performances 221,925 - 221,925 Accounts Receivable 48,763 - 48,763 Cost of Sales 4,810 - Accrued A/P - 275,498 (275,498) To properly state inventory and accrued on unsold inventory not paid as of yearend 9 Individual Ticket Sales 52,284 - Gift Certificate Liability - 52,284 (52,284) To accrue additional gift certificate liability. 10 Other Asset (L/T) 38,750 - 38,750 Prepaid-Creator Advances - 38,750 (38,750) Deferred Revenue (L/T) 42,032 - Deferred Revenue - 42,032 (42,032) To reclass prepaid to L/T To reclass Deferred Revenue to S/T 11 Wages 53,983 - Wages - COS 59,501 - Payroll Taxes 11,349 - Dep Expense -Web Development - 12,928 Deferred Project Costs - 20,105 (20,105) Web Development - 104,727 (104,727) Accum Dep -Web Development 12,927 12,927 To account for internally developed software costs in accordance with SOP 98-1 12 Taxes & Licenses 4,434 - Interest Expense 7,936 - Prepaid -Liability Insurance 3,333 - 3,333 Insurance Prop/Casualty 1,667 - Insurance Financing Liability - 17,370 (17,370) To adjust insurance short term borrowing account 13 Accounting Fees 250,000 - Accrued Professional Fees - 250,000 (250,000) To accrue additional audit fees 14 Revenues 653,101 - Cost of Sales - 520,918 Deferred Charge - 58,220 (58,220) Inventory - 47,482 (47,482) Accrued Expense -Hairspray - 26,481 (26,481) To account for COOP rebates and revenue 15 Compensation Expense -SG&A 9,141 - Paid in Capital - 9,141 To properly recognize expense from employee equity award. 16 Allowance for Doubtful Accounts 213,317 - 213,317 Bad Debt Expense - 213,317 To adjust AFDA per revised calculation 17 Consulting Fees 100,000 - Security Deposits - 100,000 (100,000) To Write-off deposit for potential acquisition. 18 Rent Expense 34,823 - Deferred Rent Credit - 34,823 (34,823) To account for rent in accordance with FTB 88-1 19 Ad Revenue Banner 212,087 - Ad agency Commissions - 212,087 To reverse 15% estimated agency cost gross up 20 Inventory 15,000 - 15,000 Credit Card Fees - 15,000 To adjust deferred credit card fees. 21 SG&A 155,766 - Accrued Expenses - 155,766 (155,766) To accrued unrecorded liabilities. 22 Other Assets 123,000 - 123,000 Ppd Acq. Deposits - 123,000 (123,000) To reclass consulting options granted for services rendered in conjunction with an acquisition to L/T Unrecorded Entries 23 SG&A 47,584 - Other Receivable 22,738 - 22,738 Accrued Expenses - 70,322 (70,322) To accrue for unrecorded liabilities and offsetting liability to Movietickets.com 24 Legal Fees 42,000 - Other Receivables - 42,000 (42,000) To W/O Tribune Receivable, which was subsequently collected. ------------------------------------------------------ 431,443 (75,608) (1,250,756) ====================================================== Financial Statement Caption Balance 19,421,378 50,390,221 21,373,040 % of Financial Statement Caption Balance 2.22% -0.15% -5.85%
** TABLE CONTINUED ** 2
------------------------------------------------------------------------------ Debit/(Credit) ------------------------------------------------------------------------------ ACCOUNT DESCRIPTION Long-term Shareholders' Net Operating Net RECORDED ENTRIES liabilities equity Revenues expenses Loss 1 Inventories - COS-Tickets (145,408) (145,408) Accrued Expenses - To accrue weekendings, hotel costs and restaurant vouchers. 2 Fixed Assets -Software - Prepaid - Others - To reclass deferred project costs initially booked as prepaid. 3 Revenues 80,741 80,741 Accounts Receivable - Depreciation and Amortization Expense 3,083 3,083 SG&A 49,586 49,586 Salaries and benefits 111,050 111,050 Intangible Asset - Paid-in Capital 23,779 - Accumulated Depreciation - Fixed Assets - Goodwill - Accrued Expenses - Accumulated Amortization - To adjust opening balance sheet for SSI, FRM and GTI acquisitions. 4 Deferred Revenue-Future Performance - Ticket Sales (34,650) (34,650) To properly state deferred sellables ( hotel) 5 Deferred Revenue-Future Performance - Ticket Sales 26,318 26,318 Customer Deposits/Refunds - To adjust for excess service charge 6 Consulting Fees 20,664 20,664 Paid in Capital (20,664) - To properly recognize expense from consultant equity award. 7 Hotel/Travel Package Income 21,315 21,315 Deferred Rev -Hotel Package - To adjust hotel packages 8 Inventory-Future Performances - Accounts Receivable - Cost of Sales 4,810 4,810 Accrued A/P - To properly state inventory and accrued on unsold inventory not paid as of yearend 9 Individual Ticket Sales 52,284 52,284 Gift Certificate Liability - To accrue additional gift certificate liability. 10 Other Asset (L/T) - Prepaid-Creator Advances - Deferred Revenue (L/T) 42,032 - Deferred Revenue - To reclass prepaid to L/T To reclass Deferred Revenue to S/T 11 Wages 53,983 53,983 Wages - COS 59,501 59,501 Payroll Taxes 11,349 11,349 Dep Expense -Web Development (12,928) (12,928) Deferred Project Costs - Web Development - Accum Dep -Web Development - To account for internally developed software costs in accordance with SOP 98-1 12 Taxes & Licenses 4,434 4,434 Interest Expense 7,936 7,936 Prepaid -Liability Insurance - Insurance Prop/Casualty 1,667 1,667 Insurance Financing Liability - To adjust insurance short term borrowing account 1 13 Accounting Fees 250,000 250,000 Accrued Professional Fees - To accrue additional audit fees 14 Revenues 653,101 653,101 Cost of Sales (520,918) (520,918) Deferred Charge - Inventory - Accrued Expense -Hairspray - To account for COOP rebates and revenue 15 Compensation Expense -SG&A 9,141 9,141 Paid in Capital (9,141) - To properly recognize expense from employee equity award. 16 Allowance for Doubtful Accounts - Bad Debt Expense (213,317) (213,317) To adjust AFDA per revised calculation 17 Consulting Fees 100,000 100,000 Security Deposits - To Write-off deposit for potential acquisition. 18 Rent Expense 34,823 34,823 Deferred Rent Credit - To account for rent in accordance with FTB 88-1 19 Ad Revenue Banner 212,087 212,087 Ad agency Commissions (212,087) (212,087) To reverse 15% estimated agency cost gross up 20 Inventory - Credit Card Fees (15,000) (15,000) To adjust deferred credit card fees. 21 SG&A 155,766 155,766 Accrued Expenses - To accrued unrecorded liabilities. 22 Other Assets - Ppd Acq. Deposits - To reclass consulting options granted for services rendered in conjunction with an acquisition to L/T Unrecorded Entries 23 SG&A 47,584 47,584 Other Receivable - Accrued Expenses To accrue for unrecorded liabilities and offsetting liability to Movietickets.com 24 Legal Fees 42,000 42,000 Other Receivables - To W/O Tribune Receivable, which was subsequently collected. ---------------------------------------------------------------------------- 42,032 (6,026) 1,011,196 (152,281) 858,915 ============================================================================ Financial Statement Caption Balance 1,289,289 47,149,270 72,978,667 82,929,891 11,597,799 % of Financial Statement Caption Balance 3.26% -0.01% 1.39% -0.18% 7.41%
** TABLE COMPLETE ** 2 Exhibit 2 Q1-04 Q2-04 Q3-04 Q4-04 Y2-04 Y3-04 Y4-04 -------------------------------------------------------------------------------------------------- Total Revenue - As reported (14,784,720) (19,384,309) (15,102,828) (23,713,691) (34,169,029) (49,271,857) (72,985,548) Re classifying Adjustments: --------------------------- Co-op Rebate 193,663 167,928 146,135 (507,726) 361,591 507,726 - Agency 64,522 48,875 27,689 (141,086) 113,397 141,086 - Revenue - If restated (14,526,535) (19,167,506) (14,929,004) (24,362,503) (33,694,041) (48,623,045) (72,985,548) % Impact - period Revenue -1.75% -1.12% -1.15% 2.74% -1.39% -1.32% 0.00% % Impact - annualized Revenue -0.35% -0.30% -0.24% 0.89% -0.65% -0.89% 0.00% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total COS - As reported 11,135,381 15,517,238 11,576,157 18,516,090 26,652,619 38,228,776 56,744,866 Re-classifying Adjustments: --------------------------- Co-op (193,663) (167,928) (146,135) 507,726 (361,591) (507,726) - COS - If restated 10,941,718 15,349,310 11,430,022 19,023,816 26,291,028 37,721,050 56,744,866 % Impact - period COS -1.74% -1.08% -1.26% 2.74% -1.36% -1.33% 0.00% % Impact - annualized COS -0.34% -0.30% -0.26% 0.89% -0.64% -0.89% 0.00% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total SG&A - As reported 4,978,313 4,637,130 5,977,935 8,175,626 9,615,443 15,593,378 23,769,004 Re-classifying Adjustments: --------------------------- Agency (64,522) (48,875) (27,689) 141,086 (113,397) (141,086) - SG&A - If restated 4,913,791 4,588,255 5,950,246 8,316,712 9,502,046 15,452,292 23,769,004 % Impact - period SG&A -1.30% -1.05% -0.46% 1.73% -1.18% -0.90% 0.00% % Impact - annualized SG&A -0.27% -0.21% -0.12% 0.59% -0.48% -0.59% 0.00% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total IAS Revenue - As reported (772,507) (759,469) (514,859) (768,806) (1,531,976) (2,046,835) (2,815,641) Re-classifying Adjustments: --------------------------- Agency 64,522 48,875 27,689 (141,086) 113,397 141,086 - IAS - If restated (707,985) (710,594) (487,170) (909,892) (1,418,579) (1,905,749) (2,815,641) % Impact - period IAS -8.35% -6.44% -5.38% 18.35% -7.40% -6.89% 0.00% % Impact - annualized IAS -2.29% -1.74% -0.98% 5.01% -4.03% -5.01% 0.00% --------------------------------------------------------------------------------------------------
** TABLE CONTINUED ** Q1-03 Q2-03 Q3-03 Q4-03 Y2-03 Y3-03 Y4-03 -------------------------------------------------------------------------------------------------- Total Revenue - As reported (14,537,686) (17,146,181) (13,925,910) (19,249,185) (31,683,867) (45,609,777) (64,858,962) Re classifying Adjustments: --------------------------- Co-op Rebate 176,398 199,938 202,891 218,623 376,336 579,227 797,850 Agency 66,455 49,303 52,270 35,953 115,758 168,028 203,981 Revenue - If restated (14,294,833) (16,896,940) (13,670,749) (18,994,609) (31,191,773) (44,862,522) (63,857,131) % Impact - period Revenue -1.67% -1.45% -1.83% -1.32% -1.55% -1.64% -1.54% % Impact - annualized Revenue -0.37% -0.38% -0.39% -0.39% -0.76% -1.15% -1.54% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total COS - As reported 11,198,457 13,744,810 10,479,340 14,843,699 24,943,267 35,422,607 50,266,306 Re-classifying Adjustments: --------------------------- Co-op (176,398) (199,938) (202,891) (218,623) (376,336) (579,227) (797,850) COS - If restated 11,022,059 13,544,872 10,276,449 14,625,076 24,566,931 34,843,380 49,468,456 % Impact - period COS -1.58% -1.45% -1.94% -1.47% -1.51% -1.64% -1.59% % Impact - annualized COS -0.35% -0.40% -0.40% -0.43% -0.75% -1.15% -1.59% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total SG&A - As reported 4,709,438 4,357,756 4,794,737 4,844,747 9,067,194 13,861,931 18,706,678 Re-classifying Adjustments: --------------------------- Agency (66,455) (49,303) (52,270) (35,953) (115,758) (168,028) (203,981) SG&A - If restated 4,642,983 4,308,453 4,742,467 4,808,794 8,951,436 13,693,903 18,502,697 % Impact - period SG&A -1.41% -1.13% -1.09% -0.74% -1.28% -1.21% -1.09% % Impact - annualized SG&A -0.36% -0.26% -0.28% -0.19% -0.62% -0.90% -1.09% -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Total IAS Revenue - As reported (492,452) (736,686) (694,599) (888,436) (1,229,138) (1,923,737) (2,812,173) Re-classifying Adjustments: --------------------------- Agency 66,455 49,303 52,270 35,953 115,758 168,028 203,981 IAS - If restated (425,997) (687,383) (642,329) (852,483) (1,113,380) (1,755,709) (2,608,192) % Impact - period IAS -13.49% -6.69% -7.53% -4.05% -9.42% -8.73% -7.25% % Impact - annualized IAS -2.36% -1.75% -1.86% -1.28% -4.11% -5.97% -7.25% --------------------------------------------------------------------------------------------------
** TABLE COMPLETE ** -----END PRIVACY-ENHANCED MESSAGE-----