UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ——————— FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-38331 DOLPHIN ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) ——————— (State or othe ...

Dolphin Entertainment, Inc. (NASDAQ:DLPN) Q1 2023 Earnings Conference Call May 15, 2023 4:30 PM ET Company Participants James Carbonara – Managing Partner-Hayden IR, Inc. Bill O'Dowd – Chief Executive Officer Mirta Negrini – Chief Financial Officer Conference Call Participants Allen Klee – Maxim Group Operator Good day, everyone, and welcome to today's Dolphin Entertainment First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ——————— FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-38331 DOLPHIN ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) ——————— Indicate by c ...

Financial Data and Key Metrics Changes - Revenue for the year ended December 31, 2022, was approximately $40.5 million, a 13% increase from $35.7 million in 2021 [35] - Operating expenses for 2022 were approximately $45.1 million, compared to $41.2 million in the prior year [35] - Net loss for 2022 was $4.7 million, an improvement from a net loss of $6.5 million in 2021 [38][39] - Basic loss per share for 2022 was $0.49, compared to $0.85 in the prior year [40] Business Line Data and Key Metrics Changes - The addition of Socialyte and Be Social has created a leading influencer marketing firm, expected to represent 25% or more of revenues in 2023 [18] - The influencer marketing industry has seen strong double-digit CAGR, increasing from less than $2 billion in 2016 to an estimated $14 billion in 2022 [17] - The company expects to add 3 to 4 new 2.0 deals each year, which will create meaningful cash flow [30] Market Data and Key Metrics Changes - The influencer marketing segment is one of the fastest-growing areas in marketing, with expectations for continued growth in the coming years [18] - The company has expanded its reach in the influencer marketing space, now fully bicoastal with operations in New York, Miami, and Nashville [72] Company Strategy and Development Direction - The company aims to complete its original vision of building a Super Group with the acquisition of a live events production company [32] - The hiring of a seasoned CMO is expected to enhance brand-building capabilities and support the growth of 2.0 opportunities [4][10] - The company is focused on building ventures where it can receive equity stakes without upfront cash investments [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2023, expecting strong double-digit revenue growth and positive results from 2.0 ventures [31][88] - The company anticipates that the completion of its acquisition strategy will simplify financial reporting and align net income results more closely with operating income [3] Other Important Information - The company has paused the development of new NFT collections while awaiting improved market sentiment [25] - The IMAX documentary project is expected to be released in the second half of 2023, which could significantly impact revenues [26][69] Q&A Session Summary Question: What is the financial outlook for 2023? - Management expects to achieve double-digit growth, potentially exceeding $50 million in revenue, and aims to be EBITDA positive [88] Question: How will the acquisition of Socialyte impact growth? - The integration of Socialyte and Be Social is expected to create synergies and enhance the company's influencer marketing capabilities [70] Question: What are the expectations for operating expenses in 2023? - Operating expenses are expected to increase only slightly due to the full-year impact of Socialyte, with no significant surprises anticipated [87]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-38331 DOLPHIN ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 150 Alhambra C ...

Financial Data and Key Metrics Changes - Revenues for Q3 2022 were approximately $9.9 million, an increase from approximately $9.4 million in Q3 2021, reflecting a year-over-year growth [32] - Operating expenses for Q3 2022 were approximately $11 million, compared to approximately $10.5 million in the same period of the prior year [32] - Net loss for Q3 2022 was approximately $1.3 million or $0.14 per share, compared to a net income of $141,651 or $0.02 per share in Q3 2021 [38][40] Business Line Data and Key Metrics Changes - Direct costs decreased by approximately $200,000 to approximately $837,000, primarily due to a decrease in Viewpoint's revenue [33] - Payroll and benefit expenses increased by approximately $1.2 million to approximately $7 million, attributed to additional headcount and stock compensation [34] - Acquisition costs of approximately $300,000 were primarily related to the Socialyte deal, with no acquisition costs in the same period last year [35] Market Data and Key Metrics Changes - The influencer marketing industry has seen strong growth, with global brand spend increasing from less than $2 billion in 2016 to over $10 billion in 2021, and expected to exceed $14 billion in 2022 [13][14] - Over 50% of total brand spend in influencer marketing in 2021 was in fashion, beauty, lifestyle, food, and entertainment, which are the specialties of Dolphin's agencies [16] Company Strategy and Development Direction - The acquisition of Socialyte is seen as a strategic move to enhance scale in influencer marketing, positioning Dolphin as a leading agency in the entertainment industry [10][12] - The company aims to leverage the growth in influencer marketing, expecting it to represent 25% or more of revenues in 2023 [22] - Dolphin is focusing on expanding its presence in the influencer marketing space, particularly in verticals like fashion and entertainment [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in influencer marketing and the company's ability to capitalize on this trend [48] - The CEO noted that the company is on pace for $40 million in revenue for the year without Socialyte, indicating strong underlying business performance [48] - Management acknowledged the challenges in the crypto space but emphasized Dolphin's lack of exposure to the FTX bankruptcy [27] Other Important Information - The company successfully launched its NFT collection, Creature Chronicles, generating over $435,000 in primary sales [26] - Dolphin is involved in a partnership to open ShaSha Lounge, a membership cocktail club in New Orleans, which includes a meaningful ownership stake [28][30] Q&A Session Summary Question: What is your plan on NFTs, given the current market conditions? - Management stated that they need to evaluate their NFT strategy due to the turmoil in the crypto space but emphasized their expertise in marketing within that sector [42] Question: Please provide an update on the Night Theatre and Hidden Leaf. - Management highlighted the success of the Midnight Theatre's soft opening and the strong demand for private events, indicating a positive outlook for the venue [44] Question: Any other changes in 2.0 initiatives? - Management discussed the ShaSha project as an example of a successful initiative that combines client marketing with equity participation [46] Question: Any commentary related to outlook? - Management expressed confidence in the growth of influencer marketing and its impact on revenue and profit, noting that the acquisition of Socialyte will significantly enhance their market position [47]

PART I [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Dolphin Entertainment, Inc. as of September 30, 2022, and for the three and nine-month periods then ended, including balance sheets, statements of operations, cash flows, changes in stockholders' equity, and accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased to **$55.7 million** from **$52.8 million** at year-end 2021, driven by increases in notes receivable and right-of-use assets, while total liabilities decreased to **$26.7 million** from **$29.9 million**, primarily due to a reduction in contingent consideration and convertible notes, leading to an increase in total stockholders' equity to **$29.0 million** from **$22.9 million** Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2022 ($) | Dec 31, 2021 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 4,452,562 | 7,688,743 | | Notes receivable | 4,323,153 | 1,510,137 | | Goodwill | 20,021,357 | 20,021,357 | | **Total Assets** | **55,725,468** | **52,791,451** | | **Liabilities & Equity** | | | | Total current liabilities | 15,502,876 | 14,953,271 | | Total Liabilities | 26,745,527 | 29,856,561 | | Total Stockholders' Equity | 28,979,941 | 22,934,890 | | **Total Liabilities and Stockholders' Equity** | **55,725,468** | **52,791,451** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the third quarter of 2022, the company reported a net loss of **$1.3 million**, compared to a net income of **$0.1 million** in Q3 2021, while for the nine months ended September 30, 2022, the net loss was **$1.5 million**, an improvement from a net loss of **$3.8 million** in the same period of 2021, with revenue growth offset by increased operating expenses, particularly in payroll and benefits Key Operating Results (Unaudited) | Metric | Q3 2022 ($) | Q3 2021 ($) | Nine Months 2022 ($) | Nine Months 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 9,899,013 | 9,399,432 | 29,366,748 | 25,219,793 | | Loss from operations | (1,133,767) | (1,071,711) | (1,608,534) | (2,433,265) | | Net (Loss) Income | (1,311,719) | 141,651 | (1,492,191) | (3,780,392) | | Basic (Loss) EPS | (0.14) | 0.02 | (0.16) | (0.50) | | Diluted (Loss) EPS | (0.14) | 0.02 | (0.23) | (0.50) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, net cash used in operating activities was **$3.6 million**, a significant shift from **$0.5 million** provided by operations in the prior year period, with net cash used in investing activities of **$3.2 million** primarily for notes receivable, and net cash provided by financing activities of **$4.2 million** largely from an equity line of credit, resulting in an overall decrease in cash and restricted cash by **$2.6 million** during the period Cash Flow Summary (Unaudited, Nine Months Ended Sep 30) | Activity | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | (3,634,388) | 519,960 | | Net cash used in investing activities | (3,172,544) | (525,856) | | Net cash provided by financing activities | 4,169,351 | 4,563,305 | | **Net (decrease) increase in cash** | **(2,637,581)** | **4,557,409** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide details on accounting policies and financial statement line items, highlighting revenue entirely from the Entertainment Publicity and Marketing segment, stable goodwill of **$20.0 million**, a decrease in total debt to **$4.8 million**, and significant financing through Lincoln Park equity agreements, with subsequent events including the acquisition of Socialyte, LLC for **$13 million** plus potential earn-outs and a co-production agreement with IMAX - All reported revenue for the three and nine months ended September 30, 2022, came from the Entertainment Publicity and Marketing (EPM) segment, with no revenue from the Content Production (CPD) segment[49](index=49&type=chunk) - Goodwill remained unchanged at **$20,021,357** as of September 30, 2022, with no impairment indicators identified during the period[54](index=54&type=chunk)[55](index=55&type=chunk) - Total debt decreased from **$6.2 million** at year-end 2021 to **$4.8 million** as of September 30, 2022[70](index=70&type=chunk) - The company sold a total of **1,280,000 shares** of common stock under its 2021 and 2022 Lincoln Park agreements during the nine months ended September 30, 2022, receiving total proceeds of approximately **$5.05 million**[112](index=112&type=chunk)[118](index=118&type=chunk) - On June 24, 2022, the company entered into a co-production and co-financing agreement with IMAX for a documentary called "The Blue Angels," committing to fund **50%** of the production budget, with **$1.5 million** paid towards this by September 30, 2022[152](index=152&type=chunk) - Subsequent to the quarter end, on November 14, 2022, the company acquired Socialyte, LLC for **$13 million**, paid through a combination of cash, stock, and a promissory note, plus a potential **$5 million** earn-out[158](index=158&type=chunk)[159](index=159&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=36&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's performance, highlighting revenue growth driven by the entertainment publicity and marketing segment, the "Dolphin 2.0" strategy focusing on acquiring ownership in content, live events, and consumer products with initial investments in NFTs, Midnight Theatre, and Crafthouse Cocktails, and detailing operational results where increased payroll and professional fees offset revenue gains, with liquidity supported by cash from operations and financing activities, including equity line agreements with Lincoln Park [Overview and Strategy](index=36&type=section&id=Overview%20and%20Strategy) Dolphin operates as an entertainment marketing and content production company with two segments: Entertainment Publicity and Marketing (EPM) and Content Production (CPD), pursuing a "Dolphin 2.0" investment strategy to acquire ownership stakes in assets it can promote, including content, live events, and consumer products, with initial investments in an NFT collection, an ownership interest in the Midnight Theatre in Manhattan, and an interest in Crafthouse Cocktails - The company's "Dolphin 2.0" strategy is to invest in and own an interest in assets it markets, focusing on content, live events, and consumer products[162](index=162&type=chunk)[164](index=164&type=chunk) - Key Dolphin 2.0 investments include the "Creature Chronicles" NFT collection which generated **~$435,000**, an ownership stake in the Midnight Theatre, and an interest in Crafthouse Cocktails[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) - The company entered into a co-production agreement with IMAX for the documentary feature "The Blue Angels"[170](index=170&type=chunk)[182](index=182&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Revenues increased by **$0.5 million** (**5.3%**) for Q3 2022 and **$4.1 million** (**16.3%**) for the nine months ended Sep 30, 2022, compared to the prior year periods, driven entirely by the Entertainment Publicity and Marketing segment, while total expenses also rose, led by a **$4.2 million** year-to-date increase in payroll and benefits due to higher headcount and stock compensation, and a significant swing in the fair value of contingent consideration from a **$1.3 million loss** in 2021 to a **$1.4 million gain** in 2022 contributed to a reduced net loss for the nine-month period Revenue Comparison (YoY) | Period | 2022 ($) | 2021 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Three Months** | 9,899,013 | 9,399,432 | +499,581 | +5.3% | | **Nine Months** | 29,366,748 | 25,219,793 | +4,146,955 | +16.4% | - Payroll and benefits expenses increased by **$1.2 million** for Q3 and **$4.2 million** for the nine-month period year-over-year, due to additional headcount and stock compensation[194](index=194&type=chunk) - The change in fair value of contingent consideration shifted from a **$1.3 million loss** for the first nine months of 2021 to a **$1.4 million gain** in the same period of 2022[193](index=193&type=chunk)[199](index=199&type=chunk) - Legal and professional fees increased by **$1.0 million** for the nine-month period year-over-year, primarily due to costs associated with the Lincoln Park agreement, financial restatements, and a change of auditors[200](index=200&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily managed through cash from operations and financing arrangements, with **$3.6 million** in cash used in operations for the nine months ended Sep 30, 2022, and **$5.1 million** in proceeds secured from its equity line of credit with Lincoln Park, while total debt was reduced by **$1.4 million** to **$4.8 million** during the first nine months of 2022, and subsequent to the quarter, the company issued **$1.3 million** in new convertible notes and took on a **$3.0 million** secured loan to partially finance the Socialyte acquisition - Cash used in operating activities was **$3.6 million** for the nine months ended Sep 30, 2022, compared to cash provided by operating activities of **$0.5 million** in the prior year period[215](index=215&type=chunk)[216](index=216&type=chunk) - The company received **$5.1 million** in proceeds from its equity line of credit agreements with Lincoln Park during the first nine months of 2022[219](index=219&type=chunk)[228](index=228&type=chunk)[235](index=235&type=chunk) - Total debt was reduced by **22.0%** from **$6.2 million** at Dec 31, 2021, to **$4.8 million** at Sep 30, 2022[224](index=224&type=chunk) - Subsequent to quarter-end, the company issued **$1.3 million** in convertible promissory notes and took on a **$3.0 million** five-year secured loan to finance the Socialyte acquisition[240](index=240&type=chunk)[253](index=253&type=chunk) [Controls and Procedures](index=50&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that as of September 30, 2022, the company's disclosure controls and procedures were not effective due to previously disclosed material weaknesses in the 2021 Form 10-K that have not yet been fully remediated, with remediation efforts underway including developing formal policies, enhancing management review precision, using a third-party consultant for complex transactions, and reevaluating monitoring activities - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of September 30, 2022, due to previously identified material weaknesses[264](index=264&type=chunk) - Remediation efforts are underway, including developing formal policies, enhancing management review, using a third-party consultant, and improving period-end closing procedures[265](index=265&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=52&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not aware of any pending litigation that is expected to have a material effect on its financial position, results of operations, or cash flows - As of the report date, the Company is **not aware of any pending litigation**[271](index=271&type=chunk) [Risk Factors](index=52&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021 have been reported[272](index=272&type=chunk) [Other Information](index=52&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section details the acquisition of Socialyte, LLC on November 14, 2022, for a total consideration of **$13 million**, consisting of **$5 million** in cash, **1,346,257 shares** of common stock, and a **$3 million** promissory note, with a potential additional **$5 million** earn-out, where the cash portion was partially financed by a **$3 million** secured loan, and the shares issued to the seller were unregistered, relying on an exemption under the Securities Act - On November 14, 2022, the Company acquired **100%** of the membership interests of Socialyte, LLC, a social media influencer marketing agency[276](index=276&type=chunk) - The acquisition consideration was **$13 million** plus a potential **$5 million** earn-out, with payment including **$5 million cash**, **1,346,257 common shares**, and a **$3 million promissory note**[278](index=278&type=chunk) - The acquisition was partially financed with a **$3 million**, five-year secured term loan from Bank Prov[278](index=278&type=chunk) [Exhibits](index=54&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the quarterly report, including the Membership Interest Purchase Agreement for the Socialyte acquisition, CEO and CFO certifications, and Inline XBRL data files

Financial Data and Key Metrics Changes - Q2 2022 revenue was $10.3 million, a 19% increase year-over-year, while six months 2022 revenue reached $19.5 million, up 23% year-over-year, all from organic growth in Dolphin 1.0 business [7][33] - Operating income for Q2 2022 was approximately $489,000, compared to $221,293 for Q2 2021, reflecting a significant improvement [38] - Net income for Q2 2022 was $612,008, down from $1,349,942 in Q2 2021, primarily due to a one-time gain from debt extinguishment in the previous year [39] Business Line Data and Key Metrics Changes - Dolphin 1.0, which includes entertainment marketing, showed strong performance with significant contributions from 42West and Shore Fire Media, leading to double-digit revenue growth [12][14] - The Door, Dolphin's culinary PR firm, engaged in various promotional campaigns, contributing to overall business growth [13] - Be Social, the influencer marketing group, successfully executed campaigns for major brands, enhancing Dolphin's market presence [17] Market Data and Key Metrics Changes - The entertainment marketing sector remains robust, with Dolphin benefiting from high-profile projects like the release of "Top Gun: Maverick," which grossed over $1.3 billion globally [12] - The NFT market is anticipated to strengthen in the coming months, with Dolphin planning to launch two high-profile NFT collections in the fall [26][27] Company Strategy and Development Direction - Dolphin is focused on expanding its Dolphin 2.0 initiatives, which involve taking ownership stakes in projects and leveraging its marketing expertise to drive growth [19][20] - The company aims to diversify its investments and build a sustainable revenue model through various ventures, including Midnight Theatre and NFT projects [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for increased demand for earned media services as companies may cut back on expensive advertising during economic uncertainty [55] - The company expects Dolphin 2.0 revenues to begin contributing significantly in Q4 2022, particularly from the opening of Midnight Theatre and NFT launches [42][49] Other Important Information - Dolphin's debt has been significantly reduced from over $16 million to below $5.3 million, with most remaining debt being long-term [9][10] - The company has changed auditors to Grant Thornton LLP, which is expected to enhance financial reporting and compliance [11] Q&A Session Summary Question: Are all revenues from Dolphin 1.0, and when should we expect Dolphin 2.0 revenues? - Yes, all revenues are from Dolphin 1.0, and Dolphin 2.0 revenues are expected to start in Q4 2022 with the opening of Midnight Theatre and NFT launches [42] Question: Will the size of the NFT launches be similar to previous expectations? - The size of the NFT launches will remain the same, with a focus on timing for optimal market conditions [43] Question: What are the expected normalized legal and professional expenses? - Legal and professional expenses are expected to normalize to around $500,000, similar to last year's figures [45][46] Question: How might clients reducing internal marketing manpower affect Dolphin? - If clients reduce internal manpower, they may rely more on external services, potentially benefiting Dolphin's business [54]

PART I — FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Dolphin Entertainment's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity, with detailed accounting notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets detail the company's financial position, showing reduced liabilities and increased stockholders' equity Balance Sheet Data | Metric | June 30, 2022 | December 31, 2021 | |:---|:---|:---| | Total Assets | $52,536,655 | $52,791,451 | | Total Liabilities | $23,761,092 | $29,856,561 | | Total Stockholders' Equity | $28,775,563 | $22,934,890 | - Total liabilities decreased by approximately **$6.1 million**, or **20.4%**, from December 31, 2021, to June 30, 2022, primarily due to reductions in contingent consideration and convertible notes payable at fair value[14](index=14&type=chunk) - Total stockholders' equity increased by approximately **$5.8 million**, or **25.5%**, from December 31, 2021, to June 30, 2022[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations show increased revenue, net income for the three months, and a narrowed net loss for the six months Statements of Operations Data | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Revenues | $10,290,626 | $8,643,244 | $19,467,735 | $15,820,361 | | Total Expenses | $9,801,668 | $8,421,951 | $19,942,503 | $17,159,008 | | Income (loss) from operations | $488,958 | $221,293 | $(474,768) | $(1,338,647) | | Net income (loss) | $612,008 | $1,349,942 | $(180,473) | $(3,922,043) | | Basic EPS | $0.06 | $0.17 | $(0.02) | $(0.53) | | Diluted EPS | $0.04 | $0.13 | $(0.09) | $(0.53) | - Revenues increased by **19.1%** for the three months and **23.1%** for the six months ended June 30, 2022, compared to the same periods in 2021[19](index=19&type=chunk) - Net income decreased for the three-month period (from **$1.35 million** to **$0.61 million**) but the net loss significantly narrowed for the six-month period (from **$(3.92) million** to **$(0.18) million**) year-over-year[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows show a shift to cash used in operations, consistent investing outflows, and substantial financing inflows Cash Flow Data | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|\ | Net cash (used in) provided by operating activities | $(1,719,551) | $30,060 | | Net cash used in investing activities | $(2,298,702) | $(525,856) | | Net cash provided by financing activities | $3,515,138 | $1,788,002 | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(503,115) | $1,292,206 | | Cash and cash equivalents and restricted cash, end of period | $7,727,511 | $9,929,582 | - Operating activities used **$1.72 million** in cash for the six months ended June 30, 2022, a significant change from the **$30.1 thousand** provided in the prior year, mainly due to non-cash changes in fair value of liabilities and contingent consideration[21](index=21&type=chunk)[200](index=200&type=chunk) - Financing activities provided **$3.52 million** in cash for the six months ended June 30, 2022, primarily from proceeds of **$4.37 million** from an equity line of credit agreement[21](index=21&type=chunk)[203](index=203&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased, driven by net income, share issuance to Lincoln Park Capital, and share-based compensation Stockholders' Equity Data | Metric | December 31, 2021 | June 30, 2022 | |:---|:---|:---|\ | Total Stockholders' Equity | $22,934,890 | $28,775,563 | | Common Stock Shares Outstanding | 8,020,381 | 9,551,958 | | Additional Paid-in Capital | $127,247,928 | $133,246,100 | | Accumulated Deficit | $(104,434,344) | $(104,614,817) | - Issuance of shares to Lincoln Park Capital LLC contributed **$4,367,640** to additional paid-in capital during the six months ended June 30, 2022[26](index=26&type=chunk)[106](index=106&type=chunk) - The company issued **163,369 shares** of common stock for earnout consideration related to the B/HI Communications, Inc. acquisition and **279,562 shares** for The Door Marketing Group LLC earnout consideration during the six months ended June 30, 2022[26](index=26&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures for the financial statements, covering business, accounting policies, revenue, assets, debt, equity, and segments [NOTE 1 – GENERAL](index=10&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) This note provides an overview of Dolphin Entertainment, its business, COVID-19 impact, accounting estimates, and recent pronouncements - Dolphin Entertainment, Inc. is a leading independent entertainment marketing and premium content development company, operating through subsidiaries like 42West, The Door, Shore Fire, Viewpoint, Be Social, and B/HI[30](index=30&type=chunk) - The COVID-19 pandemic has significantly impacted economic conditions, negatively affecting the food and hospitality sector and talent representation, though increased television and streaming consumption partially offset revenue decreases[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The company updated its revenue recognition accounting policy in June 2022 to include collaborative arrangements, specifically for the IMAX co-production agreement[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - New accounting guidance on business combinations (ASU 2021-08) and credit losses (ASU 2016-13) will be effective for the company on January 1, 2023, with ongoing evaluation of their impact[42](index=42&type=chunk)[43](index=43&type=chunk) [NOTE 2 – REVENUE](index=13&type=section&id=NOTE%202%20%E2%80%93%20REVENUE) This note disaggregates revenue by segment, primarily EPM, detailing contract balances and remaining performance obligations Revenue by Segment | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Entertainment publicity and marketing | $10,290,626 | $8,643,244 | $19,467,735 | $15,820,361 | | Content production | — | — | — | — | | Total revenues | $10,290,626 | $8,643,244 | $19,467,735 | $15,820,361 | - All revenues for the reported periods were generated from the Entertainment Publicity and Marketing (EPM) segment[51](index=51&type=chunk) Contract Balances | Contract Balance | December 31, 2021 | June 30, 2022 | Change | |:---|:---|:---|:---|\ | Contract Assets | $62,500 | — | $(62,500) | | Contract Liabilities (Deferred Revenue) | $406,373 | $1,189,442 | $783,069 | - As of June 30, 2022, the company had approximately **$1,189,442** of unsatisfied performance obligations, with **$1,001,943** expected to be recognized within the next twelve months[54](index=54&type=chunk) [NOTE 3 – GOODWILL AND INTANGIBLE ASSETS](index=14&type=section&id=NOTE%203%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details goodwill and finite-lived intangible assets for the EPM segment, noting unchanged goodwill and decreased intangible assets - Goodwill balance remained at **$20,021,357** as of June 30, 2022, with no changes during the three and six months ended June 30, 2022[55](index=55&type=chunk) Intangible Assets Breakdown | Intangible Asset Type | Gross Carrying Amount (June 30, 2022) | Accumulated Amortization (June 30, 2022) | Net Carrying Amount (June 30, 2022) | Net Carrying Amount (December 31, 2021) | |:---|:---|:---|:---|:---|\ | Customer relationships | $8,290,000 | $5,314,182 | $2,975,818 | $3,409,984 | | Trademarks and trade names | $4,490,000 | $2,037,417 | $2,452,583 | $2,692,083 | | Non-compete agreements | $690,000 | $660,000 | $30,000 | $40,000 | | Total | $13,470,000 | $8,011,599 | $5,458,401 | $6,142,067 | - Amortization expense for intangible assets was **$341,833** for the three months and **$683,666** for the six months ended June 30, 2022[57](index=57&type=chunk) [NOTE 4 – ACQUISITIONS](index=15&type=section&id=NOTE%204%20%E2%80%93%20ACQUISITIONS) This note details the acquisition of B/HI Communications, Inc. in January 2021, including the consideration paid and the financial performance targets achieved by the seller - The company acquired B/HI Communications, Inc. on January 1, 2021, for **$0.8 million** in common stock, adjusted for working capital and indebtedness[60](index=60&type=chunk)[61](index=61&type=chunk) - The B/HI seller earned an additional **$1.1 million** in 2021, paid as **$0.6 million** in cash and **163,369 shares** of common stock in Q2 2022[61](index=61&type=chunk) - B/HI contributed revenues of **$818,408** and **$1,426,841** for the three and six months ended June 30, 2021, respectively[61](index=61&type=chunk) [NOTE 5 – NOTES RECEIVABLE](index=15&type=section&id=NOTE%205%20%E2%80%93%20NOTES%20RECEIVABLE) This note describes the company's unsecured convertible notes receivable, primarily from Midnight Theatre, and the conversion of a note from Crafthouse Cocktails into equity - Notes receivable from Midnight Theatre amounted to **$3,362,154** as of June 30, 2022, including **$123,354** of accrued interest, convertible into Class A and B Units of Midnight Theatre[63](index=63&type=chunk) - Midnight Theatre issued **$2,238,800** in unsecured convertible promissory notes to the company during the six months ended June 30, 2022, with a **10%** annual simple coupon rate and six-month maturity[63](index=63&type=chunk) - A **$500,000** convertible promissory note from Crafthouse Cocktails was converted into membership interests on February 1, 2022, with no outstanding notes receivable from Crafthouse as of June 30, 2022[65](index=65&type=chunk)[66](index=66&type=chunk) [NOTE 6 – EQUITY METHOD INVESTMENTS](index=17&type=section&id=NOTE%206%20%E2%80%93%20EQUITY%20METHOD%20INVESTMENTS) This note outlines the company's equity method investments in Midnight Theatre and Crafthouse Cocktails, including initial investment amounts and recorded losses from Crafthouse - Equity method investments totaled **$1,000,000** in Midnight Theatre and **$1,456,600** in Crafthouse Cocktails as of June 30, 2022[68](index=68&type=chunk) - The company recorded losses of **$23,400** and **$43,400** for the three and six months ended June 30, 2022, respectively, from its equity investment in Crafthouse Cocktails[70](index=70&type=chunk) - Midnight Theatre commenced operations in late June 2022, with negligible equity in earnings or losses recorded for the period[69](index=69&type=chunk) [NOTE 7 – OTHER CURRENT LIABILITIES](index=17&type=section&id=NOTE%207%20%E2%80%93%20OTHER%20CURRENT%20LIABILITIES) This note breaks down other current liabilities, which decreased due to reductions in talent liability and accumulated customer deposits Other Current Liabilities Breakdown | Liability Type | June 30, 2022 | December 31, 2021 | |:---|:---|:---|\ | Accrued funding under Max Steel production agreement | $620,000 | $620,000 | | Accrued audit, legal and other professional fees | $425,925 | $429,299 | | Accrued commissions | $458,003 | $457,269 | | Accrued bonuses | $205,817 | $360,817 | | Due to seller of Be Social | — | $304,169 | | Talent liability | $2,196,931 | $2,908,357 | | Accumulated customer deposits | $962,855 | $1,206,864 | | Other | $461,305 | $563,809 | | Total Other Current Liabilities | $5,330,836 | $6,850,584 | - Total other current liabilities decreased by approximately **$1.52 million** from December 31, 2021, to June 30, 2022[71](index=71&type=chunk) [NOTE 8 – DEBT](index=17&type=section&id=NOTE%208%20%E2%80%93%20DEBT) This note details the company's total debt, including convertible and nonconvertible notes, and related party loans, with maturity and interest Debt Breakdown | Debt Type | June 30, 2022 | December 31, 2021 | |:---|:---|:---|\ | Convertible notes payable | $2,900,000 | $2,900,000 | | Convertible notes payable - fair value option | $466,255 | $998,135 | | Non-convertible promissory notes | $924,142 | $1,176,644 | | Loans from related party | $1,107,873 | $1,107,873 | | Total debt | $5,398,270 | $6,182,652 | | Less current portion of debt | $(513,183) | $(307,685) | | Noncurrent portion of debt | $4,885,087 | $5,874,967 | - Total debt decreased by approximately **$0.78 million** from December 31, 2021, to June 30, 2022[72](index=72&type=chunk) - Convertible notes payable (non-FVO) totaled **$2.9 million**, bearing **10%** interest and maturing in August-September 2023, with **$500,000** converted into common stock subsequent to June 30, 2022[75](index=75&type=chunk)[77](index=77&type=chunk) - Nonconvertible promissory notes aggregated **$0.92 million**, bearing **10%** interest and maturing between June and December 2023[83](index=83&type=chunk) [NOTE 9 – LOANS FROM RELATED PARTY](index=20&type=section&id=NOTE%209%20%E2%80%93%20LOANS%20FROM%20RELATED%20PARTY) This note details a promissory note from Dolphin Entertainment, LLC (CEO-owned), including its principal balance, accrued interest, and interest expense - The company has a promissory note with DE LLC (wholly owned by the CEO) with a principal balance of **$1,107,873** as of June 30, 2022, maturing on July 31, 2023[86](index=86&type=chunk)[87](index=87&type=chunk) - Accrued interest on the DE LLC Note amounted to **$110,787** as of June 30, 2022[87](index=87&type=chunk) - Interest expense related to this loan was **$27,621** for both the three months and **$54,938** for both the six months ended June 30, 2022 and 2021[88](index=88&type=chunk) [NOTE 10 – FAIR VALUE MEASUREMENTS](index=20&type=section&id=NOTE%2010%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note discloses fair value measurements for financial instruments, including convertible notes, warrants, and contingent consideration Fair Value Measurements | Financial Instrument | Fair Value Hierarchy Level | Carrying Amount (June 30, 2022) | Fair Value (June 30, 2022) | Carrying Amount (December 31, 2021) | Fair Value (December 31, 2021) | |:---|:---|:---|:---|:---|:---|\ | Cash and cash equivalents | 1 | $7,185,628 | $7,185,628 | $7,688,743 | $7,688,743 | | Restricted cash | 1 | $541,883 | $541,883 | $541,883 | $541,883 | | Convertible notes payable | 3 | $2,900,000 | $2,755,000 | $2,900,000 | $2,900,000 | | Convertible notes payable at fair value | 3 | $466,255 | $466,255 | $998,135 | $998,135 | | Warrant liability | 3 | $40,000 | $40,000 | $135,000 | $135,000 | | Contingent consideration | 3 | $710,000 | $710,000 | $4,284,221 | $4,284,221 | - The fair value of convertible notes payable (non-FVO) was estimated at **$2,755,000** as of June 30, 2022, using a Monte Carlo Simulation[94](index=94&type=chunk) - A gain in fair value of **$244,022** and **$531,880** was recorded for the three and six months ended June 30, 2022, respectively, for convertible notes payable at fair value[80](index=80&type=chunk) - Contingent consideration liability decreased significantly from **$4,284,221** at December 31, 2021, to **$710,000** at June 30, 2022, primarily due to settlements for B/HI and The Door acquisitions[91](index=91&type=chunk)[102](index=102&type=chunk) [NOTE 11 – STOCKHOLDERS' EQUITY](index=24&type=section&id=NOTE%2011%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note details transactions affecting stockholders' equity, specifically Lincoln Park Capital LLC purchase agreements for common stock - Under the 2021 LP Purchase Agreement, the company sold **1,035,000 shares** of common stock for **$4,367,640** during the six months ended June 30, 2022[106](index=106&type=chunk) - The 2021 LP Purchase Agreement was terminated effective August 12, 2022, due to the lack of an effective shelf registration statement[107](index=107&type=chunk)[214](index=214&type=chunk) - A new 2022 LP Purchase Agreement was entered into on August 10, 2022, allowing the company to sell up to **$25,000,000** in common stock over 36 months, with an initial issuance of **57,313 commitment shares**[109](index=109&type=chunk)[215](index=215&type=chunk)[251](index=251&type=chunk) [NOTE 12 – SHARE-BASED COMPENSATION](index=25&type=section&id=NOTE%2012%20%E2%80%93%20SHARE-BASED%20COMPENSATION) This note describes the company's 2017 Equity Incentive Plan, under which Restricted Stock Units (RSUs) were granted to employees, and the associated compensation expense recognized - The company granted **36,336 RSUs** under the 2017 Plan during the six months ended June 30, 2022[113](index=113&type=chunk) - Compensation expense for RSUs was **$54,757** for the three months and **$114,062** for the six months ended June 30, 2022[112](index=112&type=chunk) - As of June 30, 2022, unrecognized compensation expense related to RSUs was **$109,252**, expected to be recognized over a weighted-average period of **0.46 years**[112](index=112&type=chunk) [NOTE 13 – EARNINGS (LOSS) PER SHARE](index=25&type=section&id=NOTE%2013%20%E2%80%93%20EARNINGS%20(LOSS)%20PER%20SHARE) This note provides the computation of basic and diluted earnings (loss) per share, detailing adjustments for participating and dilutive instruments Earnings (Loss) Per Share Data | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Basic EPS | $0.06 | $0.17 | $(0.02) | $(0.53) | | Diluted EPS | $0.04 | $0.13 | $(0.09) | $(0.53) | | Weighted average shares outstanding (Basic) | 9,498,266 | 7,664,000 | 9,113,252 | 7,456,360 | | Weighted average shares outstanding (Diluted) | 9,626,143 | 7,913,396 | 9,890,621 | 7,456,360 | - The company uses the two-class method for EPS calculation due to participating securities, attributing **$12,490** and **$8,750** of net income to these securities for the three months ended June 30, 2022 and 2021, respectively[117](index=117&type=chunk) - Convertible promissory notes were anti-dilutive for the three and six months ended June 30, 2022, and warrants were anti-dilutive for the three months ended June 30, 2022[118](index=118&type=chunk) [NOTE 14 – RELATED PARTY TRANSACTIONS](index=27&type=section&id=NOTE%2014%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions, primarily accrued compensation and interest owed to the CEO, and a loan from a CEO-owned entity - Accrued compensation to the CEO totaled **$2,625,000** as of June 30, 2022, with accrued interest of **$1,445,764**[121](index=121&type=chunk) - Interest expense related to the CEO's accrued compensation was **$65,445** for both the three months and **$130,171** for the six months ended June 30, 2022 and 2021[121](index=121&type=chunk) - The company paid **$250,000** to its CEO for interest owed on accrued compensation on June 15, 2022[121](index=121&type=chunk) [NOTE 15 – SEGMENT INFORMATION](index=27&type=section&id=NOTE%2015%20%E2%80%93%20SEGMENT%20INFORMATION) This note provides financial information for the EPM and CPD segments, detailing revenues, operating income (loss), and total assets - The EPM segment generated all of the company's revenues: **$10,290,626** for the three months and **$19,467,735** for the six months ended June 30, 2022[129](index=129&type=chunk) Segment Operating Results and Assets | Segment | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | Total Assets (June 30, 2022) | |:---|:---|:---|:---|\ | EPM Operating Income (Loss) | $2,217,043 | $2,731,850 | $49,395,251 | | CPD Operating Income (Loss) | $(1,728,085) | $(3,206,618) | $3,141,404 | | Total Operating Income (Loss) | $488,958 | $(474,768) | $52,536,655 | - Goodwill of **$20,021,357** and net intangible assets of **$5,458,401** are assigned to the EPM segment[128](index=128&type=chunk) [NOTE 16 – LEASES](index=28&type=section&id=NOTE%2016%20%E2%80%93%20LEASES) This note provides information on the company's operating leases, including lease costs, sublease income, ROU asset impairment, and future lease payment maturities Lease Costs | Lease Cost Type | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |:---|:---|:---|\ | Operating lease costs | $590,072 | $1,166,611 | | Sublease income | $(76,568) | $(121,983) | | Net lease costs | $513,504 | $1,044,628 | - The company recorded an impairment of its Right-of-Use (ROU) asset amounting to **$98,857** during the three and six months ended June 30, 2022, related to a sublease[132](index=132&type=chunk) Future Lease Payment Maturities | Year | Future Lease Payments | |:---|:---|\ | 2022 (remainder) | $1,009,668 | | 2023 | $1,954,903 | | 2024 | $1,824,908 | | 2025 | $1,232,060 | | 2026 | $940,982 | | Total lease payments | $6,962,521 | - As of June 30, 2022, the weighted average remaining lease term is **3.28 years**, and the weighted average discount rate is **7.64%**[136](index=136&type=chunk) [NOTE 17 – COLLABORATIVE ARRANGEMENT](index=30&type=section&id=NOTE%2017%20%E2%80%93%20COLLABORATIVE%20ARRANGEMENT) This note describes a collaborative arrangement with IMAX to co-produce and co-finance 'The Blue Angels' documentary, including initial funding - On June 24, 2022, the company entered into an agreement with IMAX to co-produce and co-finance 'The Blue Angels' documentary, with each party funding **50%** of the production budget[138](index=138&type=chunk) - An initial payment of **$500,000** was made on June 29, 2022, recorded as capitalized production costs[138](index=138&type=chunk) - No income or expense has been recorded from this arrangement as production is in early stages[140](index=140&type=chunk) [NOTE 18 – COMMITMENTS AND CONTINGENCIES](index=30&type=section&id=NOTE%2018%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses potential legal proceedings and outlines the company's financial commitments under the IMAX co-production agreement - The company is not aware of any pending litigation expected to have a material effect on its financial position, results of operations, or cash flows[141](index=141&type=chunk)[245](index=245&type=chunk) - Under the IMAX co-production agreement, the company has committed to fund an additional **$1,500,000** of the production budget, expected to be disbursed between the remainder of 2022 and 2023[142](index=142&type=chunk)[225](index=225&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, discussing revenue, expenses, liquidity, capital, and critical accounting policies [OVERVIEW](index=31&type=section&id=OVERVIEW) This overview describes Dolphin Entertainment, its 'Dolphin 2.0' investment strategy in content and live events, and the impact of COVID-19 - Dolphin Entertainment operates in two segments: Entertainment Publicity and Marketing (EPM) and Content Production (CPD)[146](index=146&type=chunk) - The 'Dolphin 2.0' strategy focuses on investments in entertainment content, live events, and consumer products where the company's marketing expertise can influence success[145](index=145&type=chunk)[147](index=147&type=chunk) - Key Dolphin 2.0 investments include Non-Fungible Tokens (NFTs), Midnight Theatre (a variety theater and restaurant), Crafthouse Cocktails (ready-to-drink cocktails), and a co-production with IMAX for 'The Blue Angels' documentary[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk) - The COVID-19 pandemic continues to cause uncertainties and has adversely affected demand for certain services, though the extent of future impact is difficult to predict[153](index=153&type=chunk)[154](index=154&type=chunk) [Revenues](index=32&type=section&id=Revenues) This section details revenue sources, primarily from the EPM segment, including celebrity talent services, entertainment marketing, and digital media campaigns - All revenues for the three and six months ended June 30, 2022 and 2021, were derived from the Entertainment Publicity and Marketing segment[155](index=155&type=chunk) - Revenue sources include celebrity talent services, content marketing services, strategic communications, marketing for special events and brands, digital media influencer marketing, and content production of marketing materials[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - The Content Production segment did not generate revenues as projects have either not been produced/distributed or have completed their normal revenue cycles[175](index=175&type=chunk) [Expenses](index=33&type=section&id=Expenses) This section outlines primary expense categories: direct costs, payroll, SG&A, depreciation, fair value changes, and legal fees - Expenses primarily consist of direct costs, payroll and benefits, selling, general and administrative, depreciation and amortization, changes in fair value of contingent consideration, and legal and professional fees[166](index=166&type=chunk) - Direct costs include cost of services and production costs for entertainment publicity and marketing, with immaterial impairments for content production projects[167](index=167&type=chunk) - Changes in fair value of contingent consideration reflect adjustments to earn-out payment obligations for acquisitions, measured at each balance sheet date[170](index=170&type=chunk) [Other Income and Expenses](index=34&type=section&id=Other%20Income%20and%20Expenses) This section identifies components of other income and expenses, including debt extinguishment, fair value changes of notes and warrants, and interest - Other income and expenses primarily include gain on extinguishment of debt, changes in fair value of convertible notes and derivative liabilities, changes in fair value of warrants, changes in fair value of put rights, acquisition costs, and interest expense[172](index=172&type=chunk) [RESULTS OF OPERATIONS](index=34&type=section&id=RESULTS%20OF%20OPERATIONS) This section compares financial results for the three and six months ended June 30, 2022, highlighting changes in revenues, expenses, other income, and net income/loss [Revenues](index=34&type=section&id=Revenues_Results) Revenues from entertainment publicity and marketing increased significantly for both periods, driven by increased demand and cross-selling across subsidiaries Revenue by Segment | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Entertainment publicity and marketing revenues | $10,290,626 | $8,643,244 | $19,467,735 | $15,820,361 | | YoY Change (3 months) | +$1.6 million | N/A | N/A | N/A | | YoY Change (6 months) | N/A | N/A | +$3.6 million | N/A | - The increase in revenues was primarily driven by increased demand and cross-selling across most subsidiaries[174](index=174&type=chunk) [Expenses](index=34&type=section&id=Expenses_Results) Total expenses increased due to higher payroll, benefits, and NFT production costs, partially offset by a gain in fair value of contingent consideration Expense Breakdown | Expense Type | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Direct costs | $939,389 | $833,511 | $2,022,279 | $1,583,931 | | Payroll and benefits | $6,983,804 | $5,622,468 | $13,930,426 | $10,892,831 | | Selling, general and administrative | $1,519,835 | $1,194,704 | $3,039,605 | $2,718,658 | | Depreciation and amortization | $415,547 | $478,270 | $832,785 | $960,982 | | Change in fair value of contingent consideration | $(670,878) | $(165,000) | $(1,434,778) | $200,000 | | Legal and professional | $613,971 | $457,998 | $1,552,186 | $802,606 | | Total expenses | $9,801,668 | $8,421,951 | $19,942,503 | $17,159,008 | - Payroll and benefits increased by **$1.4 million** (3 months) and **$3.0 million** (6 months) due to additional headcount[179](index=179&type=chunk) - Direct costs increased by **$0.1 million** (3 months) and **$0.4 million** (6 months), mainly due to **$0.2 million** and **$0.7 million** in NFT production and marketing costs, respectively[178](index=178&type=chunk) - A **$0.7 million** gain (3 months) and **$1.4 million** gain (6 months) was recorded from changes in fair value of contingent consideration in 2022, compared to a **$0.2 million** gain and **$0.2 million** loss in 2021[181](index=181&type=chunk) [Other Income and Expenses](index=35&type=section&id=Other%20Income%20and%20Expenses_Results) Other income and expenses saw significant changes, including no debt extinguishment gain in 2022 and gains from fair value changes of convertible notes and warrants Other Income and Expenses Summary | Other Income/Expense | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Gain on extinguishment of debt, net | — | $1,012,973 | — | $955,610 | | Change in fair value of convertible notes | $244,022 | $268,974 | $531,880 | $(602,475) | | Change in fair value of warrants | $35,000 | $65,000 | $95,000 | $(2,497,877) | | Interest expense | $(125,348) | $(169,837) | $(274,737) | $(335,031) | | Total other income (expenses), net | $153,674 | $1,128,649 | $352,143 | $(2,622,247) | - No gain or loss on debt extinguishment was recorded in 2022, compared to a **$1.1 million** gain in Q2 2021 from PPP loan forgiveness[183](index=183&type=chunk) - Interest expense decreased by **$44.5 thousand** (3 months) and **$60.3 thousand** (6 months) due to lower outstanding convertible and nonconvertible notes[190](index=190&type=chunk) [Equity in losses of unconsolidated affiliates](index=36&type=section&id=Equity%20in%20losses%20of%20unconsolidated%20affiliates) The company recorded losses from its equity investment in Crafthouse Cocktails for the three and six months ended June 30, 2022, with no comparable investment in the prior year - Losses of **$23,400** (3 months) and **$43,400** (6 months) were recorded from the equity investment in Crafthouse Cocktails in 2022[191](index=191&type=chunk) - Midnight Theatre commenced operations late in Q2 2022, resulting in no equity gains or losses for the period[192](index=192&type=chunk) [Income Taxes](index=36&type=section&id=Income%20Taxes) The company recorded income tax expense for both periods due to a valuation allowance, contrasting with an income tax benefit in the prior year - Income tax expense was **$7.2 thousand** (3 months) and **$14.4 thousand** (6 months) for June 30, 2022, due to a valuation allowance and deferred expense for a 'naked credit'[193](index=193&type=chunk) - An income tax benefit of **$38.9 thousand** was recorded for the six months ended June 30, 2021, due to a reduction of the valuation allowance from the B/HI acquisition[194](index=194&type=chunk) [Net Income (Loss)](index=36&type=section&id=Net%20Income%20(Loss)) Net income decreased for the three-month period, but the net loss significantly narrowed for the six-month period, influenced by various factors Net Income (Loss) and EPS | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|:---|:---|\ | Net income (loss) | $0.6 million | $1.3 million | $(0.2) million | $(3.9) million | | Basic EPS | $0.06 | $0.17 | $(0.02) | $(0.53) | | Diluted EPS | $0.04 | $0.13 | $(0.09) | $(0.53) | - The change in net income/loss is attributed to the combined effects of increased revenues, higher operating expenses (especially payroll), and significant fluctuations in fair value adjustments for contingent consideration, convertible notes, and warrants[195](index=195&type=chunk)[197](index=197&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section analyzes liquidity and capital resources, focusing on cash flow activities, debt, financing arrangements, and the Lincoln Park equity line of credit [Cash Flows](index=37&type=section&id=Cash%20Flows_Liquidity) Cash flows from operating activities shifted to a net use of cash in 2022, while financing activities provided substantial cash, primarily from an equity line of credit Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|:---|:---|\ | Net cash (used in) provided by operating activities | $(1,719,551) | $30,060 | | Net cash used in investing activities | $(2,298,702) | $(525,856) | | Net cash provided by financing activities | $3,515,138 | $1,788,002 | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(503,115) | $1,292,206 | | Cash and cash equivalents and restricted cash, end of period | $7,727,511 | $9,929,582 | [Operating Activities](index=37&type=section&id=Operating%20Activities_Liquidity) Cash used in operating activities was $1.7 million, a significant change from prior year, mainly due to non-cash fair value changes of liabilities and contingent consideration - Cash used in operating activities was **$1.7 million** for the six months ended June 30, 2022, compared to **$30.1 thousand** provided in the prior year[200](index=200&type=chunk) - Key drivers for the change include a **$3.8 million** decrease in non-cash fair value changes of liabilities, a **$1.6 million** decrease in non-cash fair value of contingent consideration, and a **$0.5 million** payment for the IMAX agreement[200](index=200&type=chunk) [Investing Activities](index=37&type=section&id=Investing%20Activities_Liquidity) Cash used in investing activities increased significantly for the six months ended June 30, 2022, primarily due to the issuance of notes receivable - Cash used in investing activities was **$2.3 million** for the six months ended June 30, 2022, mainly due to the issuance of notes receivable[202](index=202&type=chunk) - In the prior year, **$0.5 million** was used for the acquisition of B/HI, net of cash acquired[202](index=202&type=chunk) [Financing Activities](index=37&type=section&id=Financing%20Activities_Liquidity) Cash provided by financing activities increased, primarily from the Lincoln Park equity line of credit, partially offset by contingent consideration payments and debt repayments - Cash provided by financing activities was **$3.5 million** for the six months ended June 30, 2022[203](index=203&type=chunk) - Inflows included **$4.4 million** from the Lincoln Park equity line of credit[203](index=203&type=chunk) - Outflows included **$0.6 million** for contingent consideration payment to B/HI and **$0.3 million** for repayment of notes payable[205](index=205&type=chunk) [Debt and Financing Arrangements](index=38&type=section&id=Debt%20and%20Financing%20Arrangements) The company reduced total debt and entered a new $25 million equity line of credit with Lincoln Park Capital, detailing outstanding notes and IMAX commitments - Total debt decreased by **$0.8 million** (**12.7%**) to **$5.4 million** as of June 30, 2022, from **$6.2 million** as of December 31, 2021[207](index=207&type=chunk) - The 2021 Lincoln Park Purchase Agreement was terminated, and a new 2022 LP Purchase Agreement was entered into on August 10, 2022, allowing the company to sell up to **$25 million** in common stock over 36 months[214](index=214&type=chunk)[215](index=215&type=chunk)[249](index=249&type=chunk) - As of June 30, 2022, the company had **$2.9 million** in outstanding convertible promissory notes (**10%** interest, maturing August-September 2023), with **$0.5 million** converted into common stock post-period[216](index=216&type=chunk)[219](index=219&type=chunk) - Outstanding unsecured nonconvertible promissory notes totaled **$0.9 million** (**10%** interest, maturing June-December 2023)[222](index=222&type=chunk) - The company committed to fund an additional **$1.5 million** for the IMAX 'Blue Angels' co-production, expected to be disbursed in 2022-2023[225](index=225&type=chunk) [Critical Accounting Policies, Judgments and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies,%20Judgments%20and%20Estimates) This section highlights critical accounting policies, judgments, and estimates, emphasizing the updated revenue recognition policy for collaborative arrangements - The preparation of financial statements requires significant estimates and judgments, particularly for fair value of acquisitions, liability valuations, and asset impairment assessments[229](index=229&type=chunk) - The revenue recognition accounting policy was updated in June 2022 to include guidance for collaborative arrangements, such as the IMAX co-production[229](index=229&type=chunk)[230](index=230&type=chunk) [Revenue Recognition](index=41&type=section&id=Revenue%20Recognition_MD%26A) This section details the company's approach to analyzing collaboration agreements, determining their classification, and presenting revenue from such arrangements - Collaboration agreements are assessed to determine if they involve joint operating activities with shared risks/rewards or are vendor-customer relationships[230](index=230&type=chunk) - Revenue from collaboration participants is presented separately from revenue with contracts with customers in the condensed consolidated statement of operations[231](index=231&type=chunk) [Recent Accounting Pronouncements](index=41&type=section&id=Recent%20Accounting%20Pronouncements_MD%26A) This section refers to Note 1 for a discussion of recent accounting pronouncements and their potential impact on the company's financial statements - For a discussion of recent accounting pronouncements, refer to Note 1 to the unaudited condensed consolidated financial statements[232](index=232&type=chunk) [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=42&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary statement regarding forward-looking statements, emphasizing they are based on assumptions, subject to risks, and not updated - The report contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[234](index=234&type=chunk)[235](index=235&type=chunk) - Readers should not place undue reliance on these statements, which reflect views only as of the report date, and the company undertakes no obligation to update them[235](index=235&type=chunk) - Risks are described in the Annual Report on Form 10-K and subsequent quarterly/current reports[236](index=236&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls, noting material weaknesses as of June 30, 2022, and outlining remediation efforts to improve internal control [Management's Report on the Effectiveness of Disclosure Controls and Procedures](index=42&type=section&id=Management's%20Report%20on%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective as of June 30, 2022, due to un-remediated material weaknesses identified previously - Disclosure controls and procedures were deemed not effective as of June 30, 2022, due to material weaknesses[238](index=238&type=chunk) - These material weaknesses were previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021, and remain un-remediated[238](index=238&type=chunk) [Remediation of Material Weaknesses in Internal Control over Financial Reporting](index=42&type=section&id=Remediation%20of%20Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) Remediation efforts address material weaknesses, including developing fraud risk policies, enhancing management review, engaging consultants, and improving period-end closing procedures - Remediation efforts include developing formal policies for fraud risk assessment and risk management[239](index=239&type=chunk) - The company is enhancing policies for management review of financial information and improving period-end closing procedures[239](index=239&type=chunk) - A third-party consultant has been engaged to assist with complex transactions and accounting treatment[239](index=239&type=chunk) [Changes in Internal Control over Financial Reporting](index=43&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There have been no material changes in the company's internal control over financial reporting during the most recently completed fiscal quarter - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2022[242](index=242&type=chunk) PART II — OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently aware of any pending litigation that is expected to have a material effect on its financial position, results of operations, or cash flows - The company is not aware of any pending litigation as of the report date[245](index=245&type=chunk) - Any liability from ordinary course legal proceedings is not expected to have a material effect on the company's financial position, results of operations, and cash flows[245](index=245&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes to risk factors were disclosed since the Annual Report on Form 10-K for fiscal year ended December 31, 2021[246](index=246&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on company purchases of equity securities, noting a minimal repurchase of common stock during June 2022 Equity Securities Purchased | Period | Total Number of Shares Purchased | Average Price Per Share | |:---|:---|:---|\ | 4/1/2022 – 4/30/2022 | — | — | | 5/1/2022 – 5/31/2022 | — | — | | 6/1/2022 – 6/30/2022 | 30 | $3.29 | | Total | 30 | $3.29 | [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[247](index=247&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - There are no mine safety disclosures[248](index=248&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=Item%205.%20Other%20Information) This section details the company's new $25 million purchase agreement with Lincoln Park Capital for common stock sales and the termination of the prior agreement [Entry into a Material Definitive Agreement](index=44&type=section&id=Entry%20into%20a%20Material%20Definitive%20Agreement) Dolphin Entertainment entered a new purchase agreement with Lincoln Park Capital Fund, LLC on August 10, 2022, to sell up to $25 million of common stock over 36 months - The company entered into a new 2022 LP Purchase Agreement with Lincoln Park Capital Fund, LLC on August 10, 2022[249](index=249&type=chunk) - Under the agreement, the company can sell up to **$25,000,000** of common stock over a 36-month term[249](index=249&type=chunk) - The purchase price for Regular Purchases is **98.75%** of the lesser of the lowest sale price or the average of the three lowest closing sale prices during the ten business days prior to the Purchase Date[251](index=251&type=chunk) - The aggregate number of shares sold under the agreement may not exceed **1,936,847 shares** (**19.99%** of outstanding shares) unless shareholder approval is obtained or the average price exceeds **$4.90** per share[254](index=254&type=chunk) [Termination of Material Definitive Agreement](index=46&type=section&id=Termination%20of%20Material%20Definitive%20Agreement) Concurrently with the new agreement, the prior purchase agreement with Lincoln Park Capital Fund, LLC, dated December 29, 2021, was terminated effective August 10, 2022 - The prior Purchase Agreement with Lincoln Park, dated December 29, 2021, was terminated effective August 10, 2022[262](index=262&type=chunk) [ITEM 6. EXHIBITS](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the new purchase and registration rights agreements with Lincoln Park Capital, and certifications - Exhibits include the Purchase Agreement and Registration Rights Agreement dated August 10, 2022, with Lincoln Park Capital Fund LLC[263](index=263&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also filed[263](index=263&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) The report is signed by William O'Dowd IV, Chief Executive Officer, and Mirta A Negrini, Chief Financial Officer, on behalf of Dolphin Entertainment, Inc - The report was signed by William O'Dowd IV, CEO, and Mirta A Negrini, CFO, on August 15, 2022[266](index=266&type=chunk)[267](index=267&type=chunk)

Dolphin Entertainment, Inc. (NASDAQ:DLPN) Q1 2022 Earnings Conference Call July 18, 2022 4:30 PM ET Company Participants James Carbonara - Hayden IR Bill O’Dowd - CEO Mirta Negrini - CFO Conference Call Participants Allen Klee - Maxim Group Brad Stevenson - Breakout Investors Operator Greetings, ladies and gentlemen, and welcome to the Dolphin Entertainment First Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions a ...