Dolphin Entertainment(DLPN) - 2024 Q3 - Quarterly Report

Revenue Growth - For the nine months ended September 30, 2024, total revenue increased to $39,367,418, up from$31,100,867 for the same period in 2023, representing a growth of approximately 26.6%[150] - Revenue from the entertainment publicity and marketing segment for the three months ended September 30, 2024, was $12,682,437, an increase of approximately$2.5 million compared to $10,184,511 in the same period of 2023[150] - Revenue from content production for the nine months ended September 30, 2024, was$3,421,141, attributed to the release of "The Blue Angels" documentary film[151] - The entertainment publicity and marketing segment accounted for 91.3% of total revenue for the nine months ended September 30, 2024, while content production contributed 8.7%[141] - The increase in revenue for the nine months ended September 30, 2024, was primarily driven by growth in 42West and the inclusion of $3.2 million from Special Projects and Elle, which were not present in 2023[150] Acquisitions and Investments - The company completed the acquisition of Special Projects in 2023 and Elle Communications, LLC in July 2024, aiming to enhance its entertainment publicity and marketing services[125] - The company has established an acquisition strategy to identify and acquire complementary businesses in the entertainment sector to create synergistic opportunities[125] - The company plans to enter into additional investments in 2024 under its "Ventures" strategy, focusing on entertainment content, live events, and consumer products[126] Expenses and Profitability - The company’s expenses include direct costs related to film production, payroll and benefits, and legal and professional fees, impacting overall profitability[144][145] - Total expenses for the three months ended September 30, 2024, were$20.8 million, an increase from $12.3 million in the same period of 2023, while for the nine months, expenses rose to$48.5 million from $43.2 million[152] - Direct costs increased by$69.0 thousand for the three months and $2.2 million for the nine months ended September 30, 2024, attributed to increased subsidiary revenues and$1.8 million of capitalized production costs being amortized[152] - Payroll and benefits expenses rose by approximately $1.2 million for the three months and$2.2 million for the nine months ended September 30, 2024, primarily due to the inclusion of Special Projects and Elle payroll expenses[153] - Selling, general, and administrative expenses decreased by approximately $0.3 million for the three months and$0.4 million for the nine months ended September 30, 2024, mainly due to reduced office rent and improved collections[154] - Acquisition costs related to the acquisition of Elle were $0.1 million for the three months and$0.2 million for the nine months ended September 30, 2024[155] Net Loss and Cash Flow - Net loss for the three months ended September 30, 2024, was approximately $8.7 million or ($0.80) per share, compared to a net loss of $3.9 million or ($0.55) per share for the same period in 2023[169] - Net cash used in operating activities was $1.0 million for the nine months ended September 30, 2024, a change of$3.9 million from $4.9 million used in the same period of 2023[172] - Cash flows used in investing activities for the nine months ended September 30, 2024, were$2.5 million, primarily related to notes receivable and the acquisition of Elle[173] - Cash flows provided by financing activities for the nine months ended September 30, 2024, were $2.5 million, mainly from related party loans and an equity line of credit[174] Debt and Financing - Total debt increased to$20.7 million as of September 30, 2024, up from $19.3 million as of December 31, 2023, primarily due to an increase in related party nonconvertible promissory notes[176] - The company expects to meet its debt obligations of approximately$4.9 million over the next twelve months with its current cash position and operational cash generation[177] - The company has outstanding unsecured nonconvertible promissory notes totaling $3,880,000 as of September 30, 2024, with interest rates at 10$5.8 million secured term loan and a $750,000 secured revolving line of credit[200] - As of September 30, 2024, the principal balance under the BKU Term Loan was$4,755,384, down from $5,482,614 as of December 31, 2023[204] - Interest expense related to convertible notes payable was$382,750 for the nine months ended September 30, 2024, compared to $414,880 for the same period in 2023[183] Impairment and Legal Matters - Impairment of goodwill was$6.5 million for the three months and $6.7 million for the nine months ended September 30, 2024, due to declines in market capitalization and lack of positive market response[158] - The company has filed a lawsuit against the seller of Socialyte regarding the Socialyte Purchase Agreement, which may impact future cash flows[193] Forward-Looking Statements and Risks - The company emphasizes that forward-looking statements are based on assumptions and assessments of historical trends and current conditions[210] - Risks that could lead to actual results differing from forward-looking statements are detailed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[212] - The company does not guarantee future performance and acknowledges that many risks are outside of its control[211]