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 ...

PART I — FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Dolphin Entertainment reported Q1 2022 revenue of $9.18 million, a significantly reduced net loss, and positive operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets increased to $54.1 million, liabilities decreased, and equity grew | Balance Sheet Highlights | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $9,624,275 | $7,688,743 | | Total current assets | $18,864,435 | $18,287,359 | | Goodwill | $20,021,357 | $20,021,357 | | **Total Assets** | **$54,143,466** | **$52,791,451** | | **Liabilities & Equity** | | | | Total current liabilities | $16,063,578 | $14,953,271 | | Total Liabilities | $29,426,402 | $29,856,561 | | Total Stockholders' Equity | $24,717,064 | $22,934,890 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2022 revenues grew 27.9% to $9.18 million, significantly narrowing the net loss to $0.79 million | Income Statement Highlights | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenues | $9,177,125 | $7,177,117 | | Total expenses | $10,140,834 | $8,737,057 | | Loss from operations | ($963,709) | ($1,559,940) | | Net loss | ($792,481) | ($5,271,985) | | Basic Loss per share | ($0.09) | ($0.73) | | Diluted Loss per share | ($0.13) | ($0.73) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 operating cash flow was $0.82 million, with financing providing $2.29 million, resulting in a $1.94 million net cash increase | Cash Flow Highlights | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $818,363 | ($52,036) | | Net cash used in investing activities | ($1,172,257) | ($525,856) | | Net cash provided by (used in) financing activities | $2,289,426 | ($233,671) | | Net increase (decrease) in cash | $1,935,532 | ($811,563) | | Cash, cash equivalents and restricted cash, end of period | $10,166,158 | $7,825,813 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, stable goodwill, debt, fair value measurements, equity financing, and a new IMAX co-production - All reported revenue of **$9.18 million** for Q1 2022 was generated by the Entertainment Publicity and Marketing (EPM) segment, with no revenue from the Content Production (CPD) segment[44](index=44&type=chunk) - The company's goodwill balance remained unchanged at **$20,021,357** as of March 31, 2022, with no impairment indicators identified during the quarter[49](index=49&type=chunk)[50](index=50&type=chunk) - During Q1 2022, the company sold **585,000 shares** of common stock under its agreement with Lincoln Park Capital, receiving proceeds of **$2,515,350**, with an additional **$22.5 million** remaining available as of March 31, 2022[99](index=99&type=chunk) - Subsequent to the quarter end, on June 24, 2022, the company entered into an agreement with IMAX to co-produce and co-finance a documentary on the Blue Angels, with each party funding **50%** of the production budget[125](index=125&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes 27.9% revenue growth to post-COVID recovery, reducing net loss, and highlights the 'Dolphin 2.0' investment strategy and strengthened liquidity - The company is pursuing an investment strategy called "Dolphin 2.0," focusing on acquiring ownership in assets it can market, such as entertainment content, live events, and consumer products, including NFTs, the Midnight Theatre, and Crafthouse Cocktails[128](index=128&type=chunk)[130](index=130&type=chunk) | Key Financial Metrics (Q1 2022 vs Q1 2021) | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $9,177,125 | $7,177,117 | +$2.0M | | Payroll and benefits | $6,960,283 | $5,233,116 | +$1.7M | | Net Loss | ($792,481) | ($5,271,985) | +$4.5M | - Total debt was reduced by **$0.5 million (8.3%)** during the quarter, from **$6.2 million** at year-end 2021 to **$5.7 million** as of March 31, 2022[187](index=187&type=chunk) [Controls and Procedures](index=39&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were ineffective as of March 31, 2022, due to un-remediated material weaknesses, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of March 31, 2022, due to ongoing material weaknesses[212](index=212&type=chunk) - Remediation efforts are underway, including developing formal policies for risk assessment, enhancing management review precision, using a third-party consultant for complex transactions, and improving period-end closing procedures[213](index=213&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not aware of any pending litigation expected to materially affect its financial position or operations - As of the report date, the company is **not aware** of any pending litigation[220](index=220&type=chunk) [Risk Factors](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors have occurred since the 2021 Annual Report on Form 10-K filing - No material changes to risk factors have occurred since the filing of the 2021 Form 10-K[221](index=221&type=chunk)

Dolphin Entertainment, Inc. (NASDAQ:DLPN) Q4 2021 Results Conference Call April 13, 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 Operator Good afternoon, ladies and gentlemen, and welcome to Dolphin Entertainment Fourth Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. ...

Financial Data and Key Metrics Changes - Revenue for Q3 2021 reached $9.4 million, a 70% increase year-over-year, with 41% organic growth from existing subsidiaries [10][49] - Operating income was approximately $38,000, a significant improvement from an operating loss of approximately $493,000 in Q3 2020 [52] - Net income for Q3 2021 was approximately $142,000 compared to a net loss of approximately $138,000 in the same period last year [53] - Cash and cash equivalents stood at $12.7 million as of September 30, 2021, up from $7.9 million at the end of 2020 [55] Business Line Data and Key Metrics Changes - Shore Fire Media, a music PR firm, publicized 40 tours year-to-date, contributing to the overall revenue growth [17] - 42West secured 19 Emmy nominations for its clients, showcasing the effectiveness of its PR campaigns [19] - Be Social launched a showroom concept, enhancing influencer marketing efforts and brand visibility [21][22] Market Data and Key Metrics Changes - The concert and event business is experiencing a resurgence, with significant publicity efforts aiding in the relaunch of major events [17] - The motion picture business is gradually recovering, with expectations for a full recovery by Q2 2022 [68] Company Strategy and Development Direction - The company is focusing on "Dolphin 2.0," which aims to leverage pop culture to market owned assets, including the acquisition of an ownership stake in Midnight Theater [26][32] - The NFT business is a key growth area, with plans to develop and program global NFT collections across various verticals [35][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued revenue growth, even without a full recovery in the restaurant business, which is expected to positively impact future results [68] - The company anticipates launching additional 2.0 initiatives before the end of the year, indicating a strong pipeline of opportunities [45][46] Other Important Information - The company has achieved a record cash position, significantly exceeding its total debt, which positions it well for future acquisitions and investments [12][47] - The NFT initiative is expected to be a high-margin business, with potential for recurring revenue from secondary sales [66] Q&A Session Summary Question: What is the potential impact of NFTs on the business? - Management highlighted the excitement around NFTs, emphasizing the community-based approach and the potential for high margins and recurring revenue [60][62] Question: How is the company positioned in the recovery post-pandemic? - Management noted that growth has occurred without a full recovery, with expectations for continued momentum as the motion picture and restaurant sectors recover [68][69] Question: What are the expectations for the Midnight Theater's contribution? - Management expressed confidence in the investment, indicating that metrics will be available by the next earnings call, including advanced ticket sales [38][39] Question: How does the company view its expense structure relative to revenue growth? - Management indicated that the company is close to full staffing and expects operating leverage as the NFT business scales, which is anticipated to be the highest margin business [78]

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's analysis for Dolphin Entertainment, Inc [FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and equity, along with detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show the company's financial position, highlighting assets, liabilities, and equity as of September 30, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (Unaudited) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | **$19,951,080** | **$13,896,367** | | Cash and cash equivalents | $12,652,902 | $7,923,280 | | Goodwill | $20,015,800 | $19,627,856 | | **Total Assets** | **$54,133,675** | **$49,351,951** | | **Total Current Liabilities** | **$15,416,314** | **$16,852,512** | | **Total Liabilities** | **$30,601,506** | **$29,683,154** | | **Total Stockholders' Equity** | **$23,532,169** | **$19,668,797** | - The company's financial position strengthened, with total assets growing to **$54.13 million** and stockholders' equity increasing to **$23.53 million**. The increase in assets was primarily driven by a rise in cash and cash equivalents[10](index=10&type=chunk)[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations detail the company's revenues, expenses, and net income or loss for the three and nine months ended September 30, 2021 and 2020 Statement of Operations Summary (Unaudited, in USD) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$9,399,432** | **$5,527,943** | **$25,219,793** | **$17,356,468** | | Income (Loss) from Operations | $38,289 | ($493,185) | ($1,100,358) | ($1,543,083) | | **Net Income (Loss)** | **$141,651** | **($137,630)** | **($3,780,392)** | **($1,007,384)** | | Diluted EPS | $0.02 | ($0.04) | ($0.50) | ($0.45) | - Revenues for the third quarter of 2021 increased by **70% year-over-year**, leading to a net income of **$141,651** compared to a net loss in the prior-year period. However, for the nine-month period, the net loss widened, primarily due to non-cash expenses related to changes in fair value of financial instruments[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The statements of cash flows summarize the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 Cash Flow Summary for Nine Months Ended Sep 30 (Unaudited, in USD) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $519,960 | ($607,707) | | Net cash used in investing activities | ($525,856) | ($1,060,524) | | Net cash provided by financing activities | $4,563,305 | $8,685,121 | | **Net increase in cash** | **$4,557,409** | **$7,016,890** | - The company generated positive cash flow from operations of **$0.52 million** for the first nine months of 2021, a significant improvement from the **$0.61 million** used in the same period of 2020. Financing activities were a major source of cash, primarily from the issuance of **$5.95 million** in convertible notes[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the accounting policies, significant transactions, and financial items presented in the consolidated financial statements - The company's recurring losses and accumulated deficit of **$101.8 million** as of September 30, 2021, raise substantial doubt about its ability to continue as a going concern. Management plans to raise additional capital to fund operations[53](index=53&type=chunk)[56](index=56&type=chunk) - On January 1, 2021, the company acquired B/HI Communications, an entertainment public relations agency, for consideration including stock and potential earn-outs[63](index=63&type=chunk)[64](index=64&type=chunk) - During 2021, the company received forgiveness for approximately **$2.8 million** in Paycheck Protection Program (PPP) loans, which was recorded as a gain on extinguishment of debt. The remaining **$0.3 million** loan was forgiven subsequent to the quarter end[33](index=33&type=chunk)[89](index=89&type=chunk)[144](index=144&type=chunk) - All company revenue for the reported periods was generated by the Entertainment Publicity and Marketing segment. The Content Production segment generated no revenue and incurred operating losses[130](index=130&type=chunk)[134](index=134&type=chunk) [MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance, liquidity, and capital resources, highlighting revenue growth, non-cash charges, and going concern considerations - Revenue growth was primarily attributed to the acquisitions of Be Social and B/HI, alongside increased spending from existing clients as COVID-19 related restrictions eased[177](index=177&type=chunk) - The increase in net loss for the nine-month period was largely driven by non-cash charges, including a **$2.4 million** loss on the change in fair value of exercised warrants and a **$0.8 million** loss on the change in fair value of convertible notes[186](index=186&type=chunk)[187](index=187&type=chunk)[195](index=195&type=chunk) - The company's liquidity is supported by cash on hand and funds raised through financing activities, including the issuance of **$5.95 million** in convertible notes in 2021. Management continues to seek additional funding to support operations[204](index=204&type=chunk)[208](index=208&type=chunk)[213](index=213&type=chunk) - Management believes the company is out of compliance with certain debt covenants for its Term Loan with Bank United, N.A. as of September 30, 2021, and has consequently classified the entire loan balance as a current liability[212](index=212&type=chunk) [CONTROLS AND PROCEDURES](index=45&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses, with remediation efforts underway - Disclosure controls and procedures were determined to be ineffective due to ongoing material weaknesses[231](index=231&type=chunk) - A new material weakness was identified during the quarter concerning the processes and controls over valuation models used for measuring the fair value of certain financial instruments[231](index=231&type=chunk) - The company is implementing remediation measures, including reviewing the COSO framework, enhancing segregation of duties, and utilizing a third-party consulting firm to assist with complex accounting transactions[232](index=232&type=chunk)[234](index=234&type=chunk) [PART II — OTHER INFORMATION](index=47&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults, and other required disclosures [LEGAL PROCEEDINGS](index=47&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reports no material pending legal proceedings that would significantly impact its financial condition or operations - As of the report date, the Company is not aware of any material pending legal proceedings[238](index=238&type=chunk) [RISK FACTORS](index=47&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes have been made to the risk factors disclosed in the 2020 Form 10-K[239](index=239&type=chunk) [UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=47&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company issued **$2.9 million** in convertible promissory notes through unregistered private placements during the third quarter of 2021 - Between July and September 2021, the Company issued **$2.9 million** in convertible promissory notes in unregistered transactions, relying on the exemption provided by Section 4(a)2 of the Securities Act[240](index=240&type=chunk)[241](index=241&type=chunk) [DEFAULTS UPON SENIOR SECURITIES](index=47&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reports no defaults upon its senior securities - None reported[242](index=242&type=chunk) [MINE SAFETY DISCLOSURES](index=47&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - None reported[243](index=243&type=chunk) [OTHER INFORMATION](index=47&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reports no other information required to be disclosed in this section - None reported[244](index=244&type=chunk) [EXHIBITS](index=47&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including required certifications and XBRL data files - The report includes standard exhibits such as CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act and Inline XBRL documents[245](index=245&type=chunk)

Dolphin Entertainment, Inc. (NASDAQ:DLPN) Q2 2021 Results Earnings Conference Call August 16, 2021 4:30 PM ET Company Participants James Carbonara - Investor Relations Bill O'Dowd - Chief Executive Officer Mirta Negrini - Chief Financial Officer Conference Call Participants Allen Klee - Maxim Group Operator Good day, ladies and gentlemen. And welcome to the Dolphin Entertainment Second Quarter 2021 Earnings Conference Call. All lines have been placed on listen-only mode and the floor will be open for your q ...

\ 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, 2021 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) ——————— Florida 86-0 ...

PART I — FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and equity, with detailed notes for the three months ended March 31, 2021 [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Q1 2021 saw increased revenues to **$7.18 million** but a **net loss of $5.27 million** due to non-cash expenses, with total assets at **$49.16 million** Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,111,717 | $7,923,280 | | Total current assets | $12,857,192 | $13,896,367 | | Goodwill | $20,098,451 | $19,627,856 | | Total Assets | $49,164,090 | $49,351,951 | | **Liabilities & Equity** | | | | Total current liabilities | $16,886,441 | $16,852,510 | | Total Liabilities | $28,677,269 | $29,683,154 | | Total Stockholders' Equity | $20,486,821 | $19,668,797 | Condensed Consolidated Statement of Operations (unaudited) | Metric | Three months ended March 31, 2021 (USD) | Three months ended March 31, 2020 (USD) | | :--- | :--- | :--- | | Total revenues | $7,177,117 | $6,633,800 | | Loss from operations | ($1,194,940) | ($870,859) | | Total other (expense) income, net | ($4,115,896) | $2,944,706 | | Net (loss) income | ($5,271,985) | $2,073,847 | | (Loss) earnings per share - Basic | ($0.73) | $0.40 | | (Loss) earnings per share - Diluted | ($0.73) | $0.05 | Condensed Consolidated Statement of Cash Flows (unaudited) | Cash Flow Activity | Three months ended March 31, 2021 (USD) | Three months ended March 31, 2020 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($52,036) | ($351,666) | | Net Cash Used in Investing Activities | ($525,856) | ($260,532) | | Net Cash (Used in) Provided by Financing Activities | ($233,671) | $296,693 | | **Net Decrease in Cash** | **($811,563)** | **($315,505)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, COVID-19 impact, acquisitions, and a going concern warning due to recurring losses and working capital deficit - The company's financial statements raise substantial doubt about its ability to continue as a going concern due to recurring losses, a net loss of **$5.3 million** for the quarter, and an accumulated deficit of **$103.2 million** as of March 31, 2021[44](index=44&type=chunk) - On January 8, 2021, the company acquired B/HI Communications, Inc., an entertainment public relations agency, for total consideration of **$0.8 million** in common stock plus potential earn-outs, adding **$470,595** to goodwill[52](index=52&type=chunk)[49](index=49&type=chunk) Debt Composition as of March 31, 2021 | Debt Type | Amount (USD) | | :--- | :--- | | Convertible notes payable | $150,000 | | Convertible notes payable - fair value option | $1,298,740 | | Nonconvertible notes payable | $1,250,656 | | Term loan | $800,260 | | Payroll Protection Program loans | $3,099,869 | | **Total debt** | **$6,599,525** | - The company recorded significant non-cash losses from changes in fair value for various financial instruments in Q1 2021, including a **$2.56 million** loss on warrants, an **$871,449** loss on convertible notes, a **$365,000** loss on contingent consideration, and a **$71,106** loss on put rights[15](index=15&type=chunk) - All revenue for Q1 2021 and Q1 2020 was generated by the Entertainment Publicity and Marketing segment, with the Content Production segment reporting no revenue in either period[140](index=140&type=chunk)[145](index=145&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=39&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2021 performance, highlighting revenue growth from acquisitions, a significant net loss due to non-cash charges, and ongoing going concern doubts [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Q1 2021 revenues increased to **$7.2 million** due to acquisitions, but a **$5.3 million net loss** resulted from higher operating expenses and significant non-cash fair value losses - Revenue from entertainment publicity and marketing increased by approximately **$0.5 million** year-over-year, primarily due to the revenues of the recently acquired Be Social and B/HI[198](index=198&type=chunk) - Payroll expenses increased by approximately **$0.3 million** year-over-year, reflecting the inclusion of Be Social and B/HI payroll costs, partially offset by personnel reductions in other subsidiaries due to COVID-19[206](index=206&type=chunk) - The significant increase in net loss was primarily driven by non-cash charges, including a **$2.56 million** loss on the change in fair value of warrants and an **$871,449** loss on the change in fair value of convertible notes[207](index=207&type=chunk)[211](index=211&type=chunk)[209](index=209&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces substantial doubt about its going concern ability due to a **$4.0 million** working capital deficit and **$103.2 million** accumulated deficit, relying on external capital - The company's financial condition, including a working capital deficit of **$4.0 million** and an accumulated deficit of **$103.2 million**, raises substantial doubt about its ability to continue as a going concern[222](index=222&type=chunk) - The company received approximately **$2.8 million** in Paycheck Protection Program (PPP) loans, which it expects will be forgiven[223](index=223&type=chunk) - As of March 31, 2021, all put rights related to the 42West acquisition had been exercised, with a remaining liability of **$1,054,235**[228](index=228&type=chunk) - The company believes it is out of compliance with certain debt covenants for its Term Loan as of March 31, 2021, classifying the entire **$800,260** balance as a current liability[231](index=231&type=chunk) [Controls and Procedures](index=49&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and procedures were ineffective due to material weaknesses, with remediation plans underway including external accounting firm assistance - Management concluded that disclosure controls and procedures were not effective as of March 31, 2021, due to material weaknesses disclosed in the 2020 Form 10-K[249](index=249&type=chunk) - Remediation plans are in progress, including a review of the COSO framework, enhancing segregation of duties, and documenting procedures for complex transactions[250](index=250&type=chunk)[251](index=251&type=chunk) - During the quarter, the company hired an accounting firm to assist in the review of accounting for complex transactions as part of its remediation efforts[252](index=252&type=chunk) PART II — OTHER INFORMATION [Risk Factors](index=50&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to previously disclosed risk factors were reported in the current period - There have been no material changes to the risk factors disclosed in the company's 2020 Annual Report on Form 10-K[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company issued a **$150,000** convertible promissory note and repurchased 22,867 common shares during the quarter - On March 30, 2021, the company issued a convertible promissory note for **$150,000** with a 10% annual interest rate, maturing in two years[256](index=256&type=chunk) Company Purchases of Equity Securities (Q1 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share (USD) | | :--- | :--- | :--- | | Jan 2021 | — | $ — | | Feb 2021 | — | $ — | | Mar 2021 | 22,867 | $46.10 | | **Total** | **22,867** | **$46.10** | [Other Information](index=50&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Post-quarter events include CEO and CFO salary increases and a director's resignation from the Board - Effective January 1, 2021, the annual base salary for the CEO was increased to **$400,000** and for the CFO to **$300,000**[259](index=259&type=chunk) - On May 16, 2021, Leslee Dart resigned from the Board of Directors but will continue as an employee, with the resignation not due to any disagreements with the company[260](index=260&type=chunk) [Exhibits](index=50&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed, including CEO and CFO certifications and XBRL documents - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[261](index=261&type=chunk)