![[10-Q] Dolphin Entertainment, Inc. Quarterly Earnings Report](https://celebrity.land/en/wp-content/uploads/2026/05/10-Q-Dolphin-Entertainment-Inc-Quarterly-Earnings-Report.webp)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
———————
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
———————
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices, including
zip code)
(
(Registrant’s telephone number)
———————
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| The |
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by checkmark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of shares of common stock outstanding
was as of May 11, 2026.
TABLE OF CONTENTS
| Page | ||
| PART I — FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS | 1 |
| Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (unaudited) | 1 | |
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (unaudited) | 3 | |
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (unaudited) | 4 | |
| Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2026 and 2025 (unaudited) | 6 | |
| Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22 |
| ITEM 4. | CONTROLS AND PROCEDURES | 32 |
| PART II — OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 34 |
| ITEM 1A. | RISK FACTORS | 34 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 34 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 34 |
| ITEM 4 | MINE SAFETY DISCLOSURES | 34 |
| ITEM 5. | OTHER INFORMATION | 34 |
| ITEM 6. | EXHIBITS | 35 |
| SIGNATURES | 36 | |
i
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2026 |
December 31, 2025 |
|||||||
| ASSETS | ||||||||
| Current | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable: | ||||||||
| Trade, net of allowance of $ |
||||||||
| Other receivables | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Capitalized production costs, net | ||||||||
| Employee receivable | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Property, equipment and leasehold improvements, net | ||||||||
| Other long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
(Continued)
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
| March 31, 2026 |
December 31, 2025 |
|||||||
| LIABILITIES | ||||||||
| Current | ||||||||
| Accounts payable | $ | $ | ||||||
| Term loans, current portion | ||||||||
| Revolving line of credit | ||||||||
| Notes payable, current portion | ||||||||
| Convertible notes payable, current portion | ||||||||
| Accrued interest – related party | ||||||||
| Accrued compensation – related party | ||||||||
| Lease liabilities, current portion | ||||||||
| Deferred revenue | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Noncurrent | ||||||||
| Term loans, noncurrent portion | ||||||||
| Notes payable, noncurrent portion | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable– related party | ||||||||
| Convertible notes payable at fair value | ||||||||
| Loans from related party | ||||||||
| Lease liabilities | ||||||||
| Deferred tax liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred Stock, Series C, $ par value, shares authorized, shares issued and outstanding at March 31, 2026 and December 31, 2025 | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
Three March |
||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | $ | ||||||
| Expenses: | ||||||||
| Direct costs | ||||||||
| Payroll and benefits | ||||||||
| Selling, general and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Acquisition cost | ||||||||
| Legal and professional | ||||||||
| Total expenses | ||||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other (expenses) income: | ||||||||
| Change in fair value of convertible note | ||||||||
| Interest expense, net | ( |
) | ( |
) | ||||
| Total other (expenses) income, net | ( |
) | ( |
) | ||||
| Income tax expense | ( |
) | ( |
) | ||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Loss per share: | ||||||||
| Basic | $ | ( |
) | $ | ( |
) | ||
| Diluted | $ | ( |
) | $ | ( |
) | ||
| Weighted average number of shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Allowance for credit losses | ||||||||
| Change in fair value of convertible notes | ( |
) | ( |
) | ||||
| Deferred income tax expense | ||||||||
| Amortization of debt premium | ( |
) | ||||||
| Debt origination costs amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, trade and other | ( |
) | ||||||
| Other current assets | ( |
) | ( |
) | ||||
| Capitalized production costs | ( |
) | ( |
) | ||||
| Other long-term assets and employee receivable | ( |
) | ( |
) | ||||
| Deferred revenue | ||||||||
| Accounts payable | ( |
) | ( |
) | ||||
| Accrued interest – related party | ) | |||||||
| Other current liabilities | ( |
) | ||||||
| Other noncurrent liabilities | ( |
) | ||||||
| Lease liability, operating leases | ( |
) | ( |
) | ||||
| Lease liability, finance leases | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible note payable | ||||||||
| Proceeds from notes payable | ||||||||
| Repayment of term loan | ( |
) | ( |
) | ||||
| Principal payments on finance leases | ( |
) | ( |
) | ||||
| Net cash (used in) provided by financing activities | ( |
) | ||||||
| Net decrease in cash and cash equivalents and restricted cash | ( |
) | ( |
) | ||||
| Cash and cash equivalents and restricted cash, beginning of period | ||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
|
Three March |
||||||||
| 2026 | 2025 | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH FLOWS INFORMATION: | ||||||||
| Convertible notes payable converted into shares of common stock | $ | $ | ||||||
The following table provides a reconciliation of cash, cash equivalents
and restricted cash reported within the statements of cash flows that sum to the total of the same such amounts shown in the statements
of cash flows:
|
Three March |
||||||||
| 2026 | 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | $ | ||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
| For the three months ended March 31, 2026 | ||||||||||||||||||||||||||||
| Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Net loss for the three months ended March 31, 2026 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Conversion of convertible notes payable | — | |||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| For the three months ended March 31, 2025 | ||||||||||||||||||||||||||||
| Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Net loss for the three months ended March 31, 2025 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Issuance of shares related to restricted stock units | — | ( |
) | |||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – GENERAL
Dolphin Entertainment, Inc.,
a Florida corporation (the “Company,” “Dolphin,” “we,” “us” or “our”), is
a leading independent entertainment marketing and production company. Through its subsidiaries 42West, LLC (“42West”), The
Door Marketing Group, LLC (“The Door”), Shore Fire Media, Ltd (“Shore Fire”), The Digital Dept., LLC (“The
Digital Dept.”), Special Projects LLC (“Special Projects”), and Elle Communications, LLC (“Elle”), the Company
provides expert strategic marketing and publicity services to many of the top brands, both individual and corporate, in the motion picture,
television, music, gaming, culinary, hospitality and lifestyle industries.
42West (Film and Television,
Gaming), Shore Fire (Music), The Door (Culinary, Hospitality, Lifestyle) and Elle (Impact, Philanthropy, Non-Profit) are each recognized
global public relations (“PR”) and marketing leaders for the industries they serve. The Digital Dept. provides influencer
marketing capabilities through divisions dedicated to influencer talent management, brand campaign strategy and execution, and influencer
event ideation and production. Special Projects is the entertainment industry’s leading celebrity booking firm, specializing in
uniting brands and events with celebrities and influencers across the entertainment, media, fashion, consumer product and tech industries.
Dolphin’s legacy content production business, founded by our Emmy-nominated Chief Executive Officer, Bill O’Dowd, has produced
multiple feature films and award-winning digital series, primarily aimed at family and young adult markets.
Basis of Presentation
The accompanying unaudited
condensed consolidated financial statements include the accounts of Dolphin, and all of its wholly owned subsidiaries, comprising Dolphin
Films, Inc. (“Dolphin Films”), Dolphin SB Productions LLC, Dolphin Max Steel Holdings, LLC, Dolphin JB Believe Financing,
LLC, Dolphin JOAT Productions, LLC, 42West, The Door, Shore Fire, The Digital Dept., Special Projects and Elle. The accounts of Always
Alpha Sports Management, LLC (“Always Alpha”) are also included as of and for the three months ended March 31, 2025. Always
Alpha was subsequently sold on November 14, 2025. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company applies the equity method of accounting for its investments in entities for which it does not have a controlling financial
interest, but over which it has the ability to exert significant influence.
The unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
(“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and Article 8 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary
for a fair statement of its financial position as of March 31, 2026, and its results of operations and cash flows for the three months
ended March 31, 2026 and 2025. All significant inter-company balances and transactions have been eliminated from the condensed consolidated
financial statements. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may
be expected for the full year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 has been derived
from the audited financial statements at that date but does not include all the information and footnotes required by U.S. GAAP for complete
financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the audited
consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2025.
Use of Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts
of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial
statements relate to the estimates in the fair value of acquisitions, estimates in assumptions used to calculate the fair value of certain
liabilities and impairment assessments for investment in capitalized production costs, goodwill and long-lived assets. Actual results
could differ materially from such estimates.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
Recent Accounting Pronouncements
Accounting Pronouncements Adopted in 2026
In July 2025, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit
Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05
provides a practical expedient that permits an entity to assume that conditions at the balance sheet date remain unchanged over the life
of the asset when estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 is effective
for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted.
The amendments in ASU 2025-05 should be applied prospectively. The Company adopted this ASU prospectively in the first quarter of 2026,
and its adoption did not have a material effect on the Company’s condensed consolidated financial statements.
Accounting Guidance Not Yet Adopted
In November 2024, the FASB
issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires the
disaggregated disclosure of specific expense categories, including employee compensation, depreciation, and amortization, within relevant
income statement captions. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal
years beginning after December 15, 2027. Adoption of ASU 2024-03 can either be applied prospectively to consolidated financial statements
issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the consolidated
financial statements. Early adoption is also permitted. ASU 2024-03 will likely result in the required additional disclosures being included
in our consolidated financial statements once adopted. We are currently evaluating the provisions of ASU 2024-03.
NOTE 2 – REVENUE
Disaggregation of Revenue
The Company’s
principal geographic markets are within the U.S. The following is a description of the principal activities, by reportable segment, from
which we generate revenue. For more detailed information about reportable segments, see Note 10.
Entertainment Publicity and Marketing
The Entertainment Publicity
and Marketing (“EPM”) segment generates revenue from diversified marketing services, including public relations, entertainment
and hospitality content marketing, strategic marketing consulting and content production of marketing materials. Within the EPM segment,
we typically identify one performance obligation, the delivery of professional publicity services, in which we typically act as the principal.
The Company renders services to clients for a fixed monthly fee. The services provided by the Company are considered a single performance
obligation that is simultaneously consumed by clients as they are being rendered by the Company. The Company recognizes revenue as the
monthly services are performed. Direct costs reimbursed by clients are billed as pass-through revenue with no mark-up.
We also enter into management
agreements with a roster of social media influencers, athletes and sports broadcasters and we are paid a percentage of the revenue
earned by them. Due to the short-term nature of these contracts, in which we typically act as the agent, the performance obligation is
typically completed and revenue is recognized net at a point in time, typically the date of publication.
Content Production
The Content Production (“CPD”)
segment generates revenue from the production of original motion pictures and other digital content production. In the CPD segment, we
typically identify performance obligations depending on the type of service, for which we generally act as the principal. Revenue from
motion pictures is recognized upon transfer of control of the licensing rights of the motion picture to the customer. For minimum guarantee
licensing arrangements, the amount related to each performance obligation is recognized when the content is delivered, and the window
for exploitation rights in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit
from the content. For sales or usage-based royalty income, revenue is recognized starting at the exhibition date and is based on the Company’s
participation in the box office receipts of the theatrical exhibitor and the performance of the motion picture.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
During the three months
ended March 31, 2026, the
entered into an agreement with YB Aircraft Productions Inc. (“YB”) to acquire the licensing rights to distribute
Youngblood movie worldwide, with the exception of Canada, and agreed to pay YB a guaranteed, non-refundable advance of $700,000,
payable in two equal installments of $350,000 each, on August 31, 2026 and February 28, 2027. The $700,000 advance to YB was
recorded in direct costs in our condensed consolidated statement of operations for the three months ended March 31, 2026. The
Company also entered into a distribution agreement with Well Go USA, Inc. (“Well Go”) to distribute the film across all
media in the United States. The agreement provides for a $450,000 guaranteed, non-refundable advance against the revenues from the
distribution of Youngblood upon delivery of the film to Well Go. The film was released in theaters on March 6, 2026 and the Company
recorded revenues of $450,000 from the minimum guaranteed advance for the three months ended March 31, 2026.
During the three months
ended March 31, 2025, the Company recognized $92,033 of revenue in its CPD segment related to sales of its motion picture Believe released
in 2013.
The revenues recorded by the EPM
and CPD segments is detailed below:
| For the Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Entertainment publicity and marketing | $ | $ | ||||||
| Content production | ||||||||
| Total Revenues | $ | $ | ||||||
Contract Balances
The opening and closing balances
of our contract asset and liability balances from contracts with customers as of March 31, 2026 and December 31, 2025 were as follows:
| Accounts Receivable | Other Receivables | Contract Assets | Contract Liabilities | |||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ||||||||||||||
| Balance at March 31, 2026 | ||||||||||||||||||
Contract assets are comprised
of services provided for which consideration has not been received and are transferred to accounts receivable when the right to payment
becomes unconditional. Contract assets are presented within other current assets in the condensed consolidated balance sheets as of March
31, 2026 and December 31, 2025.
Contract liabilities are
recorded when the Company receives advance payments from customers for public relations projects or as deposits for promotional or brand-supported
video projects. Once the work is performed or the projects are delivered to the customer, the contract liabilities are deemed earned and
recorded as revenue. Advance payments received are generally for a short duration and are recognized once the performance obligation of
the contract is met.
Revenues for the three months ended March 31, 2026 and 2025 include
the following:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Amounts included in the beginning of year contract liability balance | $ | $ | ||||||
The Company’s
unsatisfied performance obligations are for contracts that have an original expected duration of one year or less and, as such, the Company
is not required to disclose the remaining performance obligation.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 3 — GOODWILL AND INTANGIBLE ASSETS
Goodwill
As of March 31, 2026, the
Company had a balance of $
The Door, Special Projects, Shore Fire and Elle. All the Company’s goodwill is related to the entertainment, publicity and marketing
segment.
The Company evaluates goodwill
in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include but are
not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, (3) significant
decline in market capitalization or (4) an adverse action or assessment by a regulator. There were no triggering events noted during the
three months ended March 31, 2026 and 2025, that would require the Company to reassess goodwill for impairment outside its annual impairment
test.
Intangible Assets
Finite-lived intangible assets consisted of the following as of
March 31, 2026 and December 31, 2025:
| March 31, 2026 |
December 31, 2025 |
|||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||||||||
| Intangible assets subject to amortization: | ||||||||||||||||||||||||
| Customer relationships | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Trademarks and trade names | ||||||||||||||||||||||||
| Non-compete agreements | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Amortization expense
associated with the Company’s intangible assets was $
respectively.
| 2026 | $ | |||||
| 2027 | ||||||
| 2028 | ||||||
| 2029 | ||||||
| 2030 | ||||||
| Thereafter | ||||||
| Total | $ | |||||
NOTE 4 — OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
| March 31, 2026 |
December 31, 2025 |
|||||||
| Accrued funding under Max Steel marketing agreement | $ | $ | ||||||
| Accrued producer guarantee fee for Youngblood | ||||||||
| Accrued audit, legal and other professional fees | ||||||||
| Accrued commissions | ||||||||
| Accrued bonuses | ||||||||
| Talent liability | ||||||||
| Accumulated customer deposits | ||||||||
| Other | ||||||||
| Other current liabilities | $ | $ | ||||||
During the three months ended March
31, 2025, the Company entered into an agreement with Andrea Oliveri and Nicole Vecchiarelli, (“Special Projects Sellers”), to pay
$
period of one year from the acquisition date of October 1, 2023, the payment due to the Special Projects Sellers was recorded as acquisition
costs in the condensed consolidated statement of operations for the three months ended March 31, 2025. The additional consideration related
to the working capital adjustment was paid in installments during the year ended December 31, 2025 and there was no balance outstanding
related to this arrangement as of March 31, 2026 and December 31, 2025.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 5 — DEBT
Total debt of the Company was as follows as of March 31, 2026
and December 31, 2025:
| Debt Type | March 31, | December 31, | ||||||
| 2026 | 2025 | |||||||
| Convertible notes payable | $ | $ | ||||||
| Convertible note payable – fair value option | ||||||||
| Non-convertible promissory notes | ||||||||
| Non-convertible promissory notes – Socialyte | ||||||||
| Convertible notes from related party | ||||||||
| Loans from related party | ||||||||
| Revolving line of credit | ||||||||
| First BKU Term loan | ||||||||
| Second BKU Term loan | ||||||||
| Debt issuance costs | ( |
) | ( |
) | ||||
| Total debt | $ | $ | ||||||
| Less current portion of debt | ( |
) | ( |
) | ||||
| Noncurrent portion of debt | $ | $ | ||||||
The table below details the maturity dates of the principal amounts
for the Company’s debt as of March 31, 2026:
| Debt Type |
Maturity Date |
2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | |||||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Nonconvertible promissory notes | ||||||||||||||||||||||||||
| Nonconvertible unsecured promissory note – Socialyte | (A) | |||||||||||||||||||||||||
| Revolving line of credit | ||||||||||||||||||||||||||
| First BKU Term Loan | ||||||||||||||||||||||||||
| Second BKU Term Loan | ||||||||||||||||||||||||||
| Convertible notes form related party | ||||||||||||||||||||||||||
| Loans from related party | ||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
(A) As
discussed below, The Socialyte Purchase Agreement (as defined below) allows the Company to offset a working capital deficit against the
Socialyte Promissory Note (as defined below). As such, the Company deferred the installment payments until the final post-closing working
capital adjustment is agreed upon with the seller of Socialyte.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
Convertible Notes Payable
During the three months
ended March 31, 2026 and 2025 the Company issued one and six convertible notes payable and received proceeds of $
respectively. As of March 31, 2026, the Company had twenty-nine convertible notes payable outstanding. The convertible notes payable bear
interest at a rate of
respective issuances.
The balance of each convertible
notes payable and any accrued interest may be converted at the noteholder’s option at any time at the following conversion prices:
| Aggregate Convertible Notes balance | Conversion Price | Floor/Conversion Price | ||||
| $ | $ | |||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
As of March 31, 2026 the
principal balance of $
respectively, on its condensed consolidated balance sheet under the caption convertible notes payable. As of December 31, 2025 the principal
balance of $
on its condensed consolidated balance sheet under the caption convertible notes payable.
On January 26, 2026, March
9, 2026 and March 18, 2026, three holders of three convertible notes payable with an aggregate principal balance of $
the full principal amount of each of the convertible promissory notes payable into an aggregate of shares of the Company’s
common stock, pursuant to the provisions of their respective convertible notes payable. On January 8, 2026, the Company issued a convertible
note payable in the amount of $
at a price of $
promissory notes converted the aggregate principal balance of $
common stock pursuant to the convertible notes payable. On May 8, 2026, the Company entered into two subscription agreements (the “Subscription Agreements”)
with two investors for two convertible promissory notes (each a “Notes”) in the aggregate principal amount of $
received cash proceeds of $
convert all or part of the principal balance of the Notes and any accrued interest thereon at any time before the maturity date into shares
of the Company’s common stock at a purchase price of $
The Company recorded interest
expense related to these convertible notes payable of $
In addition, the Company made cash interest payments amounting to $
31, 2026 and 2025, related to the convertible notes payable.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
Convertible Note Payable at Fair Value
The Company has one convertible
note payable outstanding with a principal amount of $
the estimated fair value of the note was recorded on its issue date. At each balance sheet date, the Company records the fair value of
the convertible note payable with any changes in the fair value recorded in the condensed consolidated statements of operations.
The Company had a balance
of $
balance sheets related to the convertible note payable measured at fair value. See Note 7 – Fair Value Measurements for further
discussion on the valuation of this convertible note payable.
The Company recorded a gain
in fair value of $
of operations related to this convertible note payable at fair value.
The convertible
note payable at fair value bears interest at a rate of
note payable at fair value of $
payments amounting to $
value.
Nonconvertible Promissory Notes
During the three months
ended March 31, 2025, the Company issued a nonconvertible promissory note and received proceeds $
nonconvertible promissory notes during the three months ended March 31, 2026. As of March 31, 2026, the Company had eleven outstanding
unsecured nonconvertible promissory notes in the aggregate amount of $
between November 2026 and October 2030.
As of both March 31, 2026
and December 31, 2025, the Company had a balance of $
on its condensed consolidated balance sheets related to these unsecured nonconvertible promissory notes.
The Company recorded interest
expense related to these nonconvertible promissory notes of $
The Company made interest payments of $
to the nonconvertible promissory notes.
Nonconvertible Unsecured Promissory Note – Socialyte Promissory Note
In connection with the purchase
agreement for the acquisition of Socialyte (“Socialyte Purchase Agreement”), the Company entered into a promissory note with
the sellers of Socialyte (“the Socialyte Promissory Note”) amounting to $3,000,000. The Socialyte Promissory Note matured
on September 30, 2023 and was payable in two payments: $
Promissory Note carries an interest of 4% per annum, which accrues monthly, and all accrued interest was to be due and payable on September
30, 2023.
The Socialyte Purchase Agreement
allows the Company to offset a working capital deficit against the Socialyte Promissory Note. As such, the Company deferred these installment
payments until the final post-closing working capital adjustment is agreed upon with the seller of Socialyte. The Company has filed a
lawsuit against the seller of Socialyte and certain of its principals related to the Socialyte Purchase Agreement. See Note 12.
The Company recorded interest
expense related to this Socialyte Promissory Note of $
were made during the three months ended March 31, 2026 and 2025, related to the Socialyte Promissory Note.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
BankUnited Term Loans
On September 29, 2023, the
Company entered into a loan agreement with BankUnited (“BankUnited Loan Agreement”) in which an existing term loan with BankProv
was repaid (the “Refinancing Transaction”). The BankUnited Loan Agreement includes: (i) $
BKU Term Loan”), (ii) and $
Card (“BKU Commercial Card”). The First BKU Term Loan carries a
Line of Credit carries an initial origination fee of 0.5% and a 0.25% fee on each annual anniversary and matures in September 2026; the
penalty equal to 5% in year one, 4% in year two, 3% in year three, 2% in year four and 1% in year five of the outstanding balance. The
BKU Line of Credit and BKU Commercial Card can be repaid without any prepayment penalty.
On December 6, 2024, the
Company entered into a second Bank United Loan Agreement (“Second BKU Term Loan”) for $2.0 million to finance the acquisition
of Elle. The Second BKU Term Loan carries a 1.0% origination fee and matures in December 2027. Similar to the First
Second BKU Term Loan has a declining prepayment penalty equal to 3% in year one, 2% in year two and 1% in year three of the outstanding
balance. (The First BKU Term Loan, Second BKU Term Loan, BKU Line of Credit and BKU Commercial Card are collectively referred to as the
“Bank United Credit Facility”).
Interest accrues at 8.10%
fixed rate per annum on the First BKU Term Loan and 7.10% fixed rate per annum on the Second BKU Term Loan. Principal and interest are
payable on a monthly basis based on a 5-year amortization for the First BKU Term Loan and 3-year amortization for the Second BKU Term
Loan. Interest on the BKU Line of credit is payable on a monthly basis, with all principal due at maturity. The BKU Commercial Card payment
is due in full at the end of each bi-weekly billing cycle. During the three months ended March 31, 2026 and the year ended December 31,
2025, the Company did not use the BKU Commercial Card. During each of the three months ended March 31, 2026 and 2025, the Company made
payments in the amount of $354,621, inclusive of $
each of the three months ended March 31, 2026 and 2025, the Company made payments in amount of $185,995, inclusive of $
respectively, of interest related to the Second BKU Term Loan.
Interest on the BKU Line
of Credit is variable based on the Lender’s Prime Rate. During the three months ended March 31, 2026 and 2025, the Company recorded
interest expense and made payments of $
As of March 31, 2026, the
Company had a balance of $
of debt issuance costs, in its condensed consolidated balance sheet related to the First BKU Term Loan and the Second BKU Term Loan. As
of December 31, 2025, we had a balance of $
net of $
Term Loan. As of March 31, 2026 and December 31, 2025, the Company had a balance of $
of Credit.
Amortization of debt origination
costs under the Bank United Credit Facility is included as a component of interest expense in the condensed consolidated statements of
operations and amounted to approximately $
The BankUnited Credit Facility
contains financial covenants tested semi-annually, starting on June 30, 2024, on a trailing twelve-month basis that require the Company
to maintain a minimum debt service coverage ratio of 1.25:1.00 and a maximum funded debt/EBITDA ratio of 3.00:1.00. In addition, the BankUnited
Credit Facility contains a liquidity covenant that requires the Company to hold a cash balance at BankUnited with a daily minimum deposit
balance of $
FVP Loan
wholly-owned subsidiaries, Shore Fire Media, Ltd. and The Door Marketing Group, LLC (collectively, the “Borrowers”), executed
a Loan Agreement with certain Lenders and FVP Servicing, LLC (“FVP”), as agent for the Lenders providing for (i) a term loan
in the amount of $2,000,000, (ii) a delayed draw term loan in the amount of $2,000,000 that, subject to certain conditions, will be become
available on November 7, 2026 and (ii) a second delayed draw term loan in the amount of $1,000,000 that, subject to certain conditions,
will become available on May 7, 2027 (the “Loans”).
and will have a maturity date of
addition, the Borrowers entered into a Security Agreement pursuant to which they granted FVP and the Lenders a security interest in substantially
all of its assets as collateral for the loan obligations and the Company entered into a Pledge and Security Agreement granting FVP and
the Lenders a security interest in the equity of the Borrowers. Proceeds from the Loans will be for general working capital purposes.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 6 — LOANS FROM RELATED PARTY
On June 1, 2021, the Company
issued Dolphin Entertainment LLC (“DE LLC”), an entity wholly owned by the Company’s CEO, Bill O’Dowd, a nonconvertible
promissory note with a principal balance of $
which was to mature on
On April 29, 2024 and
10, 2024
and $
respectively, which were to mature on
29, 2029
at a rate of
per annum.
On May 12, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with DE LLC, pursuant
to which, the Company and DE LLC agreed to exchange the three DE LLC Notes in the aggregate principal amount of $
currently held by DE LLC for three convertible promissory notes (the “DE New Notes”) in the same principal amounts. As consideration
for the exchange, the Company and DE LLC agreed to extend the maturity dates on each of the notes by six months.
note, with a principal balance of $1,107,873 now matures on June 30, 2027, one note with a principal balance of $1,000,000 now matures
on October 29, 2029 and one note with a principal balance of $135,000, now matures on December 10, 2029. The DE New Notes continue to
bear interest at a rate of 10% per annum.
thereon at any time before the maturity date of the DE New Notes into the Company’s common stock at a conversion price of $1.00
per share. The Company accounted for this exchange as an extinguishment of debt and recorded the difference between the carrying value
of DE LLC Notes and the fair value of the DE New Notes of approximately $
million as a loss from extinguishment of debt in our condensed consolidated statement of operations for the year ended December 31, 2025.
As of March 31, 2026
and December 31, 2025, the Company had an aggregate principal balance of $
Notes under the caption convertible note payable – related party in the Company’s condensed consolidated balance sheets. During
the three months ended March, 31, 2026 and 2025, the Company did not repay any principal balance or make interest payments on the DE LLC
Notes or DE New Notes.
The Company recorded
interest expense of $
2026 and December 31, 2025 we had a balance in accrued interest – related parties of $
Company’s condensed consolidated balance sheets related to the DE LLC Notes.
Mock Notes
During 2024, the Company
issued three nonconvertible promissory notes to Mr. Donald Scott Mock, the brother of Mr. O’Dowd, in the amount of $
and $
As of both March 31,
2026 and December 31, 2025, we had a principal balance of $
in the Company’s condensed consolidated balance sheets. For the three months ended March 31, 2026 and 2025, the Company did not
repay any principal balance on the Mock Notes. During the three months ended March 31, 2026, the Company made interest payments of $
related to the Mock Notes.
The Company recorded
interest expense of $
31, 2025, we had a balance in accrued interest – related parties of $
to the Mock Notes.
NOTE 7 — FAIR VALUE MEASUREMENTS
The Company’s non-financial
assets measured at fair value on a nonrecurring basis include goodwill and intangible assets. The determination of our intangible fair
values includes several assumptions and inputs (Level 3) that are subject to various risks and uncertainties. Management believes it has
made reasonable estimates and judgments concerning these risks and uncertainties. All other financial assets and liabilities are carried
at amortized cost.
The Company’s cash
balances are representative of their fair values, as these balances are comprised of deposits available on demand. The carrying amounts
of accounts receivable, notes receivable, prepaid and other current assets, accounts payable and other non-current liabilities approximate
their fair values because of the short turnover of these instruments.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
Financial Disclosures about Fair Value of Financial Instruments
The tables below set forth information related to the Company’s
condensed consolidated financial instruments:
| Level in |
March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
| Fair Value | Carrying | Fair | Carrying | Fair | ||||||||||||||||
| Hierarchy | Amount | Value | Amount | Value | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | $ | $ | $ | |||||||||||||||
| Restricted cash | 1 | |||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Convertible notes payable | 3 | $ | $ | $ | $ | |||||||||||||||
| Convertible note payable at fair value | 3 | |||||||||||||||||||
| Convertible notes – related party | 3 | |||||||||||||||||||
Convertible notes payable
As of March 31, 2026, the Company
has twenty-nine outstanding convertible notes payable with an aggregate principal amount of $
notes payable with a related party amounting to $2,839,556. See Note 5 for further information on the terms of these convertible notes
and Note 6 for further information on terms of convertible notes with a related party.
| March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
| Level | Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||||||||
| 10% convertible notes due in May 2026 | 3 | $ | $ | $ | $ | ||||||||||||||
| 10% convertible notes due in October 2026 | 3 | ||||||||||||||||||
| 10% convertible notes due in November 2026 | 3 | ||||||||||||||||||
| 10% convertible notes due in December 2026 | 3 | ||||||||||||||||||
| 10% convertible notes due in January 2027 | 3 | ||||||||||||||||||
| 10% convertible note due in April 2027 | 3 | ||||||||||||||||||
| 10% convertible notes due in June 2027 | 3 | ||||||||||||||||||
| 10% convertible notes due in August 2027 | 3 | ||||||||||||||||||
| 10% convertible notes due in September 2027 | 3 | ||||||||||||||||||
| 10% convertible notes due in January 2028 | 3 | ||||||||||||||||||
| 10% convertible notes due in July 2028 | 3 | ||||||||||||||||||
| 10% convertible notes due in October 2028 | 3 | ||||||||||||||||||
| 10% convertible notes due in December 2028 | 3 | ||||||||||||||||||
| 10% convertible note due in March 2029 | 3 | ||||||||||||||||||
| 10% convertible note due in April 2029 | 3 | ||||||||||||||||||
| 10% convertible note due in May 2029 | 3 | ||||||||||||||||||
| 10% convertible note due in June 2029 | 3 | ||||||||||||||||||
| 10% convertible note due in July 2029 | 3 | ||||||||||||||||||
| 10% convertible notes due in January 2030 | 3 | ||||||||||||||||||
| 10% convertible notes due in February 2030 | 3 | ||||||||||||||||||
| 10% convertible notes due in August 2030 | 3 | ||||||||||||||||||
| 10% convertible notes due in September 2030 | 3 | ||||||||||||||||||
| 10% convertible note with related party due in June 2027 | 3 | ||||||||||||||||||
| 10% convertible note with related party due in October 2029 | 3 | ||||||||||||||||||
| 10% convertible note with related party due in December 2029 | 3 | ||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
The estimated fair value of the convertible notes was computed
using a Monte Carlo Simulation, using the following assumptions:
| Fair Value Assumption – Convertible Debt |
March 31, 2026 |
December 31, 2025 |
||||||
| Stock Price | $ | $ | ||||||
| Minimum Conversion Price | $ | $ | ||||||
| Annual Asset Volatility Estimate | % | % | ||||||
| Risk Free Discount Rate (based on U.S. government treasury obligation with a term similar to that of the convertible note) | – | % | – | % | ||||
Fair Value Option (“FVO”) Election – Convertible note
payable
Convertible note payable, at fair value
As of March 31, 2026, the
Company had one outstanding convertible note payable with a face value of $
is accounted for under the ASC 825-10-15-4 FVO election. Under the FVO election, the financial instrument is initially measured at its
issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.
The estimated fair value adjustment is presented as a single line item within other (expenses) income in the accompanying condensed consolidated
statements of operations under the caption “Change in fair value of convertible note.”
The March 4th
Note is measured at fair value and categorized within Level 3 of the fair value hierarchy. The following is a reconciliation of the fair
values from December 31, 2025 to March 31, 2026:
| March 4th Note |
||||
| Fair value as of December 31, 2025 | $ | |||
| Gain on change of fair value reported in the condensed consolidated statements of operations | ( |
) | ||
| Fair value as of December 31, 2025 | $ | |||
The estimated fair value
of the March 4th Note as of March 31, 2026 and December 31, 2025, was computed using a Black-Scholes simulation of the present
value of its cash flows using a synthetic credit rating analysis and a required rate of return, using the following assumptions:
| March 31, 2026 |
December 31, 2025 |
|||||||
| Face value principal payable | $ | $ | ||||||
| Original conversion price | $ | $ | ||||||
| Value of common stock | $ | $ | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Risk free rate | % | % | ||||||
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
The following table sets forth the computation of basic and diluted
loss per share:
| Three Months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Numerator | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Net income attributable to participating securities | ||||||||
| Net loss attributable to Dolphin Entertainment Common Stockholders and numerator for basic loss per share and diluted loss per share | $ | ( |
) | $ | ( |
) | ||
| Denominator | ||||||||
| Denominator for basic and diluted loss weighted-average shares | ||||||||
| Basic loss per share | $ | ) | $ | ) | ||||
| Diluted loss per share | $ | ) | $ | ) | ||||
Basic (loss) earnings per
share is computed by dividing income or loss attributable to the shareholders of common stock (the numerator) by the weighted-average
number of shares of common stock outstanding (the denominator) for the period. Diluted (loss) earnings per share assume that any dilutive
equity instruments, such as convertible notes payable and warrants were exercised and outstanding common stock adjusted accordingly, if
their effect is dilutive.
The Company’s convertible
note payable at fair value, the warrant and the Series C preferred stock have clauses that entitle the holder to participate if dividends
are declared to the common stockholders as if the instruments had been converted into shares of common stock. As such, the Company uses
the two-class method to compute earnings per share and attribute a portion of the Company’s net income to these participating securities.
These securities do not contractually participate in losses. For the three months ended March 31, 2026 and 2025, the Company had a net
loss and as such the two-class method is not presented.
For the three months ended
March 31, 2026, potentially dilutive instruments including shares of common stock issuable upon conversion of convertible notes
outstanding were not included in the diluted loss per share as inclusion was considered to be antidilutive.
For the three months ended
March 31, 2025, potentially dilutive instruments including shares of common stock upon conversion of convertible notes outstanding
and shares of common stock issuable upon exercise of the Series I Warrant were not included in the diluted loss per share as inclusion
was considered to be antidilutive.
NOTE 9 — RELATED PARTY TRANSACTIONS
As part of the employment
agreement with its CEO, the Company provided a $
on the condensed consolidated balance sheets, along with unpaid base salary of $
2012 through 2018. Any unpaid and accrued compensation due to the CEO under his employment agreement will accrue interest on the principal
amount at a rate of
and has not been renewed, the Company has an obligation under the agreement to continue to accrue interest on the unpaid balance.
As of March 31, 2026 and
December 31, 2025, the Company had accrued $
respectively, in accrued interest in current liabilities on its condensed consolidated balance sheets, related to the CEO’s employment
agreement. Amounts owed under this arrangement are payable on demand.
The Company recorded interest
expense related to the accrued compensation in the condensed consolidated statements of operations amounting to $
months ended March 31, 2026 and 2025. During the three months ended March 31, 2026 and 2025, the Company did
or interest payments in connection with the accrued compensation to the CEO.
On May 13, 2025, the Company
entered into a one-year consulting agreement with Hilarie Bass, a director, with an effective date of January 1, 2025, pursuant to which
Ms. Bass will provide commercial litigation advice and litigation consulting services to the Company. As compensation for these services
the Company will pay Ms. Bass $100,000 payable in four quarterly installments of $25,000 each. Payments in the amount of $25,000 each
were made on May 15, 2025, July 10, 2025, November 1, 2025 and January 30, 2026 related to this consulting agreement with Ms. Bass. On
April 29, 2026, the Company and Ms. Bass agreed to extend this agreement pursuant to its terms for a one-year period and it will renew
automatically annually, unless one of the parties provides written notice on non-renewal prior to the end of the then-current period.
The Company entered into
several DE LLC Notes with an entity wholly owned by its CEO and into two Mock Notes with its CEO’s brother. See Note 6 for further
discussion.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 10 — SEGMENT INFORMATION
The Company operates in two reportable
segments, Entertainment Publicity and Marketing Segment (“EPM”) and Content Production Segment (“CPD”).
| • | The Entertainment Publicity and Marketing segment is composed of 42West, The Door, Shore Fire, The Digital Dept., Special Projects and Elle. This segment primarily provides clients with diversified marketing services, including public relations, entertainment and hospitality content marketing, strategic marketing consulting and content production of marketing materials. |
| • | The Content Production segment is composed of Dolphin Entertainment and Dolphin Films. This segment engages in the production and distribution of digital content and feature films. The activities of our Content Production segment also include all corporate overhead activities. |
The Company’s chief operating
decision maker (“CODM”) is its CEO. The profitability measure employed by our CODM for allocating resources to operating segments
and assessing operating segment performance is adjusted operating income (loss) which is the loss from operations on the Company’s
condensed consolidated statements of operations adjusted for depreciation and amortization, impairment of goodwill, acquisition costs,
change in fair value of contingent consideration, stock compensation, bad debt and write-off of notes receivable.
The following tables present
revenue and significant expenses by segment that are regularly provided to the CODM. Other segment items that the CODM does not consider
in assessing segment performance are presented to reconcile to adjusted loss from operations.
| Three Months Ended March 31, 2026 | ||||||||||||
| EPM | CPD | Total | ||||||||||
| Segment revenue | $ | $ | $ | |||||||||
| Segment expenses: | ||||||||||||
| Segment direct costs | ||||||||||||
| Segment payroll and benefits | ||||||||||||
| Segment selling, general and administrative (1) | ||||||||||||
| Segment legal and professional | ||||||||||||
| Adjusted income (loss) from operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Reconciliation to consolidated loss from operations: | ||||||||||||
| Bad debt expense | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Loss from operations | $ | ( |
) | |||||||||
(1) Excludes bad debt expense
| Three Months Ended March 31, 2025 | ||||||||||||
| EPM | CPD | Total | ||||||||||
| Segment revenue | $ | $ | $ | |||||||||
| Segment expenses: | ||||||||||||
| Segment direct costs | ||||||||||||
| Segment payroll and benefits | ||||||||||||
| Segment selling, general and administrative (1) | ||||||||||||
| Segment legal and professional | ||||||||||||
| Adjusted income (loss) from operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Reconciliation to consolidated loss from operations: | ||||||||||||
| Bad debt expense | ||||||||||||
| Acquisition costs | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Loss from operations | $ | ( |
) | |||||||||
| (1) Excludes bad debt expense |
The CODM does not
review assets on a segment basis. In connection with the acquisitions of its wholly owned subsidiaries, as of March 31, 2026 the Company
had assigned $
to the EPM segment.
During the three months
ended March 31, 2026 and 2025, there were no triggering events noted that would require the Company to reassess goodwill impairment outside
of its regular annual impairment test.
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 11 — LEASES
The Company and its subsidiaries
are party to various office leases with terms expiring at different dates through February 2032. The amortizable life of the right-of-use
asset is limited by the expected lease term. Although certain leases include options to extend, the Company did not include these in
the right-of-use asset or lease liability calculations because it is not reasonably certain that the options will be executed.
| March 31 | December 31, | |||||||
| Operating Leases | 2026 | 2025 | ||||||
| Assets | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current | ||||||||
| Lease liabilities | $ | $ | ||||||
| Noncurrent | ||||||||
| Lease liabilities | $ | $ | ||||||
| Total lease liabilities | $ | $ | ||||||
| March 31 | December 31, | |||||||
| Finance Leases | 2026 | 2025 | ||||||
| Assets | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current | ||||||||
| Lease liabilities | $ | $ | ||||||
| Noncurrent | ||||||||
| Lease liabilities | $ | $ | ||||||
| Total lease liabilities | $ | $ | ||||||
The tables below show the
lease income and expenses recorded in the condensed consolidated statements of operations incurred during the three months ended March
31, 2026 and 2025 for operating and financing leases, respectively.
| Three Months Ended March 31, | |||||||
| Lease costs | Classification | 2026 | 2025 | ||||
| Operating lease costs | Selling, general and administrative expenses | $ | $ | ||||
| Sublease income | Selling, general and administrative expenses | ( |
) | ||||
| Net operating lease costs | $ | $ | |||||
| Three Months Ended March 31, | |||||||
| Lease costs | Classification | 2026 | 2025 | ||||
| Amortization of right-of-use assets | Selling, general and administrative expenses | $ | $ | ||||
| Interest on lease liability | Selling, general and administrative expenses | ||||||
| Total finance lease costs | $ | $ | |||||
Lease Payments
For the three months
ended March 31, 2026 and 2025, the Company made payments in cash related to its operating leases in the amounts of $
respectively.
Future minimum lease payments for leases for the remainder of
2026 and thereafter, were as follows:
| Year | Operating Leases |
Finance Leases |
||||||||
| 2026 | $ | $ | ||||||||
| 2027 | ||||||||||
| 2028 | ||||||||||
| 2029 | ||||||||||
| 2030 | ||||||||||
| Thereafter | ||||||||||
| Total | $ | $ | ||||||||
| Less: Imputed interest | ( |
) | ( |
) | ||||||
| Present value of lease liabilities | $ | $ | ||||||||
As of March 31,
2026, the Company’s weighted average remaining lease term on its operating and finance leases is
and the Company’s weighted average discount rate is
|
DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
NOTE 12— COMMITMENTS AND CONTINGENCIES
Litigation
On June 21, 2024, the
Company filed a complaint in Los Angeles County Superior Court against NSL Ventures (“NSL”) the Socialyte seller, and its
principals alleging that the defendants breached the Socialyte Purchase Agreement and committed acts of fraud and negligence in connection
with that transaction, and that the Company is entitled to monetary damages caused by those acts. On September 16, 2024, Defendants answered
the Complaint with a general denial and affirmative defenses. Also on September 16, 2024, defendant NSL also filed a Cross-complaint
against the Company and Social Midco, LLC, alleging a single cause of action for breach of contract. The Company and Social Midco answered
the Cross-complaint on October 1, 2024. As the case has progressed, the court appointed an independent accountant
to adjudicate certain accounting issues relevant to the case. That independent accountant’s work is ongoing. In April 2026, the
Court rejected Defendants’ attempt to dismiss the Company’s claims. Trial in the matter is scheduled for April 2027. Due to
the stage of the proceedings an estimate of any possible loss or range of loss cannot be made at this time.
The Company may be subject
to legal proceedings, claims, and liabilities that arise in the ordinary course of business. In the opinion of management and based upon
the advice of its outside counsels, the liability, if any, from any pending litigation is not expected to have a material effect in the
Company’s financial position, results of operations and cash flows.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following
management’s discussion and analysis together with our unaudited condensed consolidated financial statements and related notes included
under Part I, Item 1 of this Quarterly Report on Form 10-Q, together with the audited consolidated financial statements, the accompanying
notes, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations
and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth in the “Risk Factors” section of our Annual Report on
Form 10-K and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC.
Overview
We are a leading independent
entertainment marketing and production company. We were first incorporated in the State of Nevada on March 7, 1995 and domesticated in
the State of Florida on December 4, 2014. Our common stock trades on The Nasdaq Capital Market under the symbol “DLPN.”
Through our subsidiaries, 42West
LLC (“42West”), The Door Marketing Group LLC (“The Door”), Shore Fire Media, Ltd (“Shore Fire”), Elle
Communications, LLC (“Elle”), The Digital Dept, LLC (“The Digital Dept.”) and Special Projects Media, LLC (“Special
Projects”) we provide expert strategic marketing and publicity services to many of the top brands, both individual and corporate,
in the motion picture, television, music, gaming, culinary, hospitality, lifestyle and charitable industries. 42West (Film and Television,
Gaming), Shore Fire (Music), The Door (Culinary, Hospitality, Lifestyle) and Elle (Impact, Philanthropy, Non-Profit) are each recognized
global public relations and marketing leaders for the industries they serve. As a group, they were recognized as the #1 PR firm in the
country in the prestigious Observer rankings in 2025. The Digital Dept. provides influencer marketing capabilities through divisions dedicated
to influencer talent management, brand campaign strategy and execution, and influencer event ideation and production. Dolphin’s
legacy content production business, Dolphin Films, founded by our Emmy-nominated Chief Executive Officer, Bill O’Dowd, has produced
multiple feature films and award-winning digital series, primarily aimed at family and young adult markets.
We have established an acquisition
strategy based on identifying and acquiring companies that complement our existing entertainment publicity and marketing services and
content production businesses. We believe that complementary businesses can create synergistic opportunities and bolster profits and cash
flow. While we may acquire additional companies in the future, we are not in active negotiations with any such companies, and there is
no assurance that we will be successful in acquiring any additional companies, whether in 2026 or at all.
We have also established an investment
strategy, “Ventures” or “Dolphin 2.0,” based upon identifying opportunities to develop internally owned assets,
or acquire ownership stakes in others’ assets, in the categories of entertainment content, live events and consumer products. We
believe these categories represent the types of assets wherein our expertise and relationships in entertainment marketing most influences
the likelihood of success. We are in various stages of internal development and outside conversations on a wide range of opportunities
within these Ventures. We intend to enter into Venture investments during 2026, but there is no assurance that we will be successful in
doing so, whether in 2026 or at all.
HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS
In assessing the performance
of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating
performance of our business are revenues, direct costs, payroll and benefits, selling, general and administrative expenses, legal and
professional expenses, other income/expense and net income. Other income/expense consists mainly of interest expense, interest income
and non-cash changes in fair value of liabilities,
We operate in two reportable
segments: our entertainment publicity and marketing segment and our content production segment. The entertainment publicity and marketing
segment is composed of 42West, The Door, Shore Fire, The Digital Dept., Special Projects, and Elle, and provides clients with diversified
services, including public relations, entertainment content marketing, strategic communications, influencer marketing, celebrity booking
and live event production. The content production segment is composed of Dolphin Films and Dolphin Digital Studios, which produce and
distribute feature films and digital content.
Entertainment Publicity and Marketing (“EPM”)
Our revenue is directly
impacted by the retention and spending levels of existing clients and by our ability to win new clients. We believe that we have a stable
client base, and we have continued to grow organically through referrals and by actively soliciting new business. We earn revenues primarily
from the following sources: (i) celebrity talent services; (ii) content marketing services under multiyear master service agreements in
exchange for fixed project-based fees; (iii) individual engagements for entertainment content marketing services for durations of generally
between three and six months; (iv) strategic communications services; (v) engagements for marketing of special events such as food and
wine festivals; (vi) engagement for marketing of brands; (vii) arranging strategic marketing agreements between brands and social media
influencers or celebrities and (viii) curating and booking celebrities for live events. For these revenue streams, we collect fees through
either fixed fee monthly retainer agreements, fees based on a percentage of contracts or project-based fees.
We earn entertainment publicity and marketing revenues primarily
through the following:
Talent – We earn fees from creating and implementing strategic communication campaigns for performers and entertainers,
including Oscar, Tony and Emmy winning film, theater and television stars, directors, producers, celebrity chefs and Grammy winning
recording artists. Our services in this area include ongoing strategic counsel, media relations, studio and/or network liaison work,
and event and tour support. We believe that the proliferation of content, both traditional and on social media, will lead to an
increasing number of individuals seeking such services, which will drive growth and revenue in our Talent departments for several
years to come.
Entertainment
Marketing and Brand Strategy – We earn fees from providing marketing direction, public relations counsel and media
strategy for entertainment content (including theatrical films, television programs, DVD and VOD releases, and online series) from
virtually all the major studios and streaming services, as well as content producers ranging from individual filmmakers and creative
artists to production companies, film financiers, DVD distributors, and other entities. In addition, we provide entertainment
marketing services in connection with film festivals, food and wine festivals, awards campaigns, event publicity and red-carpet
management. As part of our services, we offer marketing and publicity services tailored to reach diverse audiences. We also provide
marketing direction targeted to the ideal consumer through a creative public relations and creative brand strategy for hotel and
restaurant groups.
Strategic
Communications – We earn fees by advising companies looking to create, raise or reposition their public profiles,
primarily in the entertainment industry. We also help studios and filmmakers deal with controversial movies, as well as high-profile
individuals address sensitive situations. We believe that growth in the Strategic Communications division will be driven by
increasing demand for these varied services by traditional and non-traditional media clients who are expanding their activities in
the content production, branding, and consumer products PR sectors.
Digital Media Influencer Marketing Campaigns – We arrange strategic marketing agreements
between brands and social media influencers, for both organic and paid campaigns. We also offer services for social media activations
at events. Our services extend beyond our own captive influencer network, and we manage custom campaigns targeting specific demographics
and locations, from ideation to delivery of results reports. We expect that our relationship with social media influencers will provide
us the ability to offer these services to our existing clients in the entertainment and consumer products industries and will be accretive
to our revenue.
Celebrity Booking and Live Event Programming – We arrange for brands and events to
book celebrity and influencer talent. Our services include the creation of the strategy to elevate the brand or event through celebrity
and/or influencer inclusion, to the booking of celebrities and influencers for commercial endorsements or appearances, to the curation
of event lists and securing attendance, to the coordination and production of live events. We believe the expansion of brands seeking
celebrity and/or influencer endorsements, as well as celebrity and/or influencers to attend brand-sponsored live events, will drive growth
and revenue for the next several years.
Content Production (“CPD”)
Project Development and Related Services
We have a team that dedicates
a portion of its time to identifying scripts, story treatments and novels for acquisition, development and production. The scripts can
be for either digital, television or motion picture productions. We have acquired the rights to certain scripts that we intend to produce
and release in the future, subject to obtaining financing. We have not yet determined if these projects would be produced for digital,
television or theatrical distribution.
We have completed development
of several feature films, which means that we have completed the script and can begin pre-production once financing is obtained. We are
planning to fund these projects through third-party financing arrangements, domestic distribution advances, pre-sales, and location-based
tax credits, and if necessary, sales of our common stock, securities convertible into our common stock, debt securities or a combination
of such financing alternatives; however, there is no assurance that we will be able to obtain the financing necessary to produce any of
these feature films.
During the three months ended March 31, 2026,
we entered into an agreement with YB Aircraft Productions Inc. (“YB”) to acquire the licensing rights to distribute Youngblood
movie worldwide, with the exception of Canada, and agreed to pay YB a guaranteed, non-refundable advance of $700,000, payable in two equal
installments of $350,000 each, on August 31, 2026 and February 28, 2027. The $700,000 advance to YB was recorded in direct costs in our
condensed consolidated statement of operations for the three months ended March 31, 2026. We also entered into a distribution agreement
with Well Go USA, Inc. (“Well Go”) to distribute the film across all media in the United States. The agreement provides for
a $450,000 guaranteed, non-refundable advance against the revenues from distribution of Youngblood upon delivery of the film to Well Go.
The film was released in theaters on March 6, 2026 and the Company recorded revenues of $450,000 from the minimum guaranteed advance for
the three months ended March 31, 2026.
Revenues
For the three months ended
March 31, 2026 and 2025, we derived a majority of our revenues from our entertainment publicity and marketing segment. During the three
months ended March 31, 2026, we generated income in our content production segment related to Youngblood.
The table below sets forth the percentage of total revenue derived
from our segments for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues: | ||||||||
| Entertainment publicity and marketing | 96.4 | % | 99.2 | % | ||||
| Content production | 3.6 | % | 0.8 | % | ||||
| Total revenue | 100 | % | 100 | % | ||||
Expenses
Our expenses consist primarily of:
| (1) | Direct costs – include certain costs of services, as well as certain production costs, related to our entertainment publicity and marketing business. Direct costs also includes the minimum guarantee of $700,000 that we agreed to pay YB for the distribution rights of Youngblood as discussed above. |
| (2) | Payroll and benefits expenses – includes wages, stock-based compensation, payroll taxes and employee benefits. |
| (3) | Selling, general and administrative expenses – includes all overhead costs except for payroll, depreciation and amortization and legal and professional fees that are reported as a separate expense item. |
| (4) | Acquisition costs – includes agreed upon payment to the sellers of Special Projects for the three months ended March 31, 2025. |
| (5) | Depreciation and amortization – includes the depreciation of our property and equipment and amortization of intangible assets and leasehold improvements. |
| (6) | Legal and professional fees – includes fees paid to our attorneys, fees for investor relations consultants, audit and accounting fees and fees for general business consultants. |
Other Income and Expenses
For the three months ended
March 31, 2026 and 2025, other income and expenses consisted primarily of: (1) changes in fair value of convertible notes and (2) interest
expense, net.
RESULTS OF OPERATIONS
Three months ended March 31, 2026 as compared to three months ended
March 31, 2025
Revenues
For the three months ended March 31, 2026 and 2025 revenues were
as follows:
| For the Three Months Ended March 31, |
||||||||
| Revenues: | 2026 | 2025 | ||||||
| Entertainment publicity and marketing | $ | 12,348,245 | $ | 12,077,678 | ||||
| Content production | 455,692 | 92,033 | ||||||
| Total Revenues | $ | 12,803,937 | $ | 12,169,711 | ||||
Revenues from entertainment
publicity and marketing increased by approximately $0.3 million for the three months ended March 31, 2026, respectively, as compared to
the same period in the prior year. The increase for the three months ended March 31, 2026, in revenue is attributed to organic growth
across substantially all of our subsidiaries.
Revenues from content production
increased by approximately $0.4 million during the three months ended March 31, 2026, compared to the same period in the prior year. The
increase was related to revenue from the distribution of Youngblood which was released in theaters on March 6, 2026. During the three
months ended March 31, 2025, we recognized $0.1 million from the Believe film released in 2013.
Expenses
For the three months ended March 31, 2026 and 2025, our expenses
were as follows:
| For Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Expenses: | ||||||||
| Direct costs | $ | 784,650 | $ | 344,414 | ||||
| Payroll and benefits | 10,715,144 | 10,304,233 | ||||||
| Selling, general and administrative | 2,047,161 | 1,772,444 | ||||||
| Acquisition costs | — | 416,171 | ||||||
| Depreciation and amortization | 537,276 | 591,552 | ||||||
| Legal and professional | 856,138 | 514,424 | ||||||
| Total expenses | $ | 14,940,369 | $ | 13,943,238 | ||||
Direct costs increased by
approximately $0.4 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase
in direct costs for the three months ended March 31, 2026 is primarily attributable to a minimum guaranteed payment of $0.7 million to
YB for the practically worldwide (excluding Canada) distribution rights of Youngblood, which was released in theatres on March 6, 2026,
offset by a decrease in production costs of events in our EPM segment of approximately $0.3 million.
Payroll and benefits
expenses increased by approximately $0.4 million for the three months ended March 31, 2026 as compared to the three months ended March
31, 2025, primarily due to $0.8 million increase in workforce and employee cost of living pay increases. This increase was offset by the
exclusion of $0.4 million of Always Alpha payroll and benefits. Always Alpha was sold in November 2025.
Selling, general and administrative
expenses increased by approximately $0.3 million, for the three months ended March 31, 2026 as compared to the three months ended March
31, 2025. The increase is mainly due to $0.1 increase in bad debt expense and $0.1 million increase in dues and subscriptions and computer
expense.
Acquisition costs for the
three months ended March 31, 2025 were $0.4 million, related to an agreed upon payment with the sellers of Special Projects related to
the working capital adjustment. There was no acquisition costs recorded for the three months ended March 31, 2026.
Depreciation and
amortization remained consistent for the three months ended March 31, 2026 as compared to the three ended March 31, 2025.
Legal and professional fees
increased by $0.3 million for the three months ended March 31, 2026, as compared to same period of the prior year. The increase is primarily
due to the litigation with the sellers of Socialyte. Refer to Note 12 to the condensed consolidated financial statements elsewhere on
this Quarterly Report on Form 10-Q for additional information.
Other Expenses
| Three Months Ended March 31 |
||||||||
| 2026 | 2025 | |||||||
| Other (expense) and income: | ||||||||
| Change in fair value of convertible note | $ | 10,000 | $ | 20,000 | ||||
| Interest expense, net | (547,950 | ) | (554,013 | ) | ||||
| Total | $ | (537,950 | ) | $ | (534,013 | ) | ||
Change in fair value
of convertible notes – We elected the fair value option for one convertible note payable issued in 2020. The fair value of this
convertible note payable is remeasured at every balance sheet date and any changes are recorded on our condensed consolidated statements
of operations. For the three months ended March 31, 2026 and 2025, we recorded a gain in the change in fair value of the convertible note
payable issued in 2020 in the amount of $10.0 thousand and $20.0 thousand, respectively. None of the decrease in the value of the convertible
note was attributable to instrument specific credit risk and as such, all the gain or loss in the change in fair value was recorded within
net loss.
Interest expense, net
– Interest expense, net remained consistent for the three months ended March 31, 2026 and 2025.
Income Taxes
We recorded an income tax
expense of approximately $17.7 thousand for the three months ended March 31, 2026, respectively, and approximately $21.5 thousand for
the three months ended March 31, 2025, respectively, which reflects the accrual of a valuation allowance in connection with the limitations
of our indefinite lived tax assets to offset our indefinite lived tax liabilities. To the extent the tax assets are unable to offset the
tax liabilities, we have recorded a deferred expense for the tax liability (a “naked credit”).
Net Loss
Net loss was approximately
$2.7 million or $(0.22) per share based on 12,327,974 weighted average shares outstanding for both basic loss per share and fully diluted
loss per share, for the three months ended March 31, 2026. Net loss was approximately $2.3 million or $(0.21) per share based on 11,162,026
weighted average shares outstanding for both basic loss per share and fully diluted loss per share, for the three months ended March 31,
2025. The change in net loss for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, is related
to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Statement of Cash Flows Data: | ||||||||
| Net cash used in operating activities | $ | (2,041,711 | ) | $ | (1,703,425 | ) | ||
| Net cash used in investing activities | (1,850 | ) | (1,088 | ) | ||||
| Net cash (used in) provided by financing activities | (429,167 | ) | 585,931 | |||||
| Net decrease in cash and cash equivalents and restricted cash | (2,472,728 | ) | (1,118,582 | ) | ||||
| Cash and cash equivalents and restricted cash, beginning of period | 9,681,589 | 9,128,846 | ||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 7,208,861 | $ | 8,010,264 | ||||
Operating Activities
Cash used in operating activities
was $2.0 million for the three months ended March 31, 2026, a change of $0.3 million from cash used in operating activities of $1.7 million
for three months ended March 31, 2025. The increase in cash used in operating activities was primarily a result of a $0.4 million increase
in net loss for the period, and the net change in working capital.
Investing Activities
Cash flows used
in investing activities for the three months ended March 31, 2026 and 2025 were inconsequential.
Financing Activities
Cash flows used in financing activities for the three months ended
March 31, 2026 were $0.4 million, which mainly related to:
Inflows:
| · | $50.0 thousand of proceeds from convertible notes payable. |
Outflows:
| · | $0.4 million of repayment of existing term loan and; |
| · | $31.0 thousand of repayment of finance leases. |
Cash flows provided by financing activities for the three months ended
March 31, 2025 were $0.6 million which mainly related to:
Inflows:
| · | $0.8 million of proceeds from convertible notes payable and; |
| · | $0.3 million of proceeds from nonconvertible notes payable. |
Outflows:
| · | $0.4 million of repayment of existing term loan and; |
| · | $21.0 thousand of repayment of finance leases. |
Debt and Financing Arrangements
Total debt amounted to
$23.8 million as of March 31, 2026, compared to $24.5 million as of December 31, 2025, a decrease of $0.7 million, primarily related
to the conversion of three convertible notes and the repayment of the term loan.
Our debt obligations in
the next twelve months from March 31, 2026 increased to $7.3 million from $7.0 million in December 31, 2025, mainly related to an increase
in the current portion of the Bank United Credit Facility (defined below in “BankUnited Loan Agreements – Refinancing Transaction”)
in the amount of $40.0 thousand and a net increase in the current portion of convertible and nonconvertible notes payable in the amount
of $0.3 million. We expect our current cash position, cash expected to be generated from our operations and other availability of funds,
as detailed below, to be sufficient to meet our debt requirements.
2025 Lincoln Park Transaction
On August 12, 2025, we entered
into a purchase agreement (the “2025 LP Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”
or “Investor”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may
sell to Lincoln Park up to $15,000,000 of shares (the “Purchase Shares”) of our common stock, par value $0.015 per share,
over the thirty-six (36) month term of the 2025 LP Purchase Agreement. Concurrently with entering into the 2025 LP Purchase Agreement
we also entered into a registration rights agreement with Lincoln Park, pursuant to which we agreed to provide Lincoln Park with certain
registration rights related to the shares issued under the 2025 LP Purchase Agreement (the “2025 LP Registration Rights Agreement”).
On October 3, 2025, we filed a new Registration Statement on Form S-1 (the “Registration Statement” with the Securities Exchange
Commission (the “SEC”) covering the resale of our common stock in accordance with the terms of the 2025 LP Registration Rights
Agreement. The registration statement became effective on December 1, 2025.
For the three months ended March
31, 2026, we did not sell any shares of common stock to Lincoln Park under the 2025 LP Purchase Agreement.
Convertible Notes Payable
During the three months
ended March 31, 2026 and 2025 we issued one and six convertible notes payable and received proceeds of $50,000 and $775,000, respectively.
As of March 31, 2026, we had twenty-nine convertible notes payable outstanding. The convertible notes payable bear interest at a rate
of 10% per annum, with initial maturity dates ranging between the second anniversary and the sixth anniversary of their respective issuances.
The balance of each convertible
notes payable and any accrued interest may be converted at the noteholder’s option at any time at the following conversion prices:
| Aggregate Convertible Notes balance |
Conversion Price | Floor/Conversion Price |
||||
| $ | 2,700,000 | 90-day average closing market price of our common stock | $ | 5.00 | ||
| 900,000 | 90-day average closing market price of our common stock | $ | 4.00 | |||
| 100,000 | 30-day average closing market price of our common stock | $ | 1.01 | |||
| 325,000 | Fixed conversion price | $ | 1.11 | |||
| 100,000 | Fixed conversion price | $ | 1.02 | |||
| 50,000 | Fixed conversion price | $ | 1.01 | |||
| 1,650,000 | Fixed conversion price | $ | 1.07 | |||
| 125,000 | Fixed conversion price | $ | 1.03 | |||
| 500,000 | Fixed conversion price | $ | 1.00 | |||
| 100,000 | Fixed conversion price | $ | 1.16 | |||
| 200,000 | Fixed conversion price | $ | 1.04 | |||
| 350,000 | Fixed conversion price | $ | 1.28 | |||
| 100,000 | Fixed conversion price | $ | 1.32 | |||
| 100,000 | Fixed conversion price | $ | 1.67 | |||
| 50,000 | Fixed conversion price | $ | 1.60 | |||
| 100,000 | Fixed conversion price | $ | 1.25 | |||
| $ | 7,450,000 | |||||
As of March 31, 2026 the
principal balance of $1,550,000 and $5,900,000 related to the convertible notes payable was recorded in current and noncurrent liabilities,
respectively, on its condensed consolidated balance sheet under the caption convertible notes payable. As of December 31, 2025 the principal
balance of $1,250,000 and $6,460,000 related to the convertible notes payable was recorded in current and noncurrent liabilities, respectively,
on its condensed consolidated balance sheet under the caption convertible notes payable.
On January 26, 2026, March
9, 2026 and March 18, 2026, three holders of three convertible notes payable with an aggregate principal balance of $310,000 converted
the full principal amount of each of the convertible promissory notes payable into an aggregate of 291,672 shares of our common stock,
pursuant to the provisions of their respective convertible notes payable. On January 8, 2026, we issued a convertible note payable in
the amount of $50,000 and received proceeds of $50,000. The note bears interest at a rate of 10% per annum, may be converted at a price
of $1.60 per share and matures on the fourth anniversary of its issuance date. On May 1, 2026, the holder of two convertible promissory
notes converted the aggregate principal balance of $500,000 and accrued interest of $4,167 into 504,167 shares of our common stock pursuant
to the convertible notes payable.
We recorded interest expense
related to these convertible notes payable of $191,136 and $136,000 during the three months ended March 31, 2026 and 2025, respectively.
In addition, we made cash interest payments amounting to $192,528 and $129,556, respectively, during the three months ended March 31,
2026 and 2025, related to the convertible notes payable.
Convertible Note Payable at Fair Value
We had one convertible promissory
note outstanding with aggregate principal amount of $500,000 as of March 31, 2026 for which it elected the fair value option. As such,
the estimated fair value of the note was recorded on its issue date. At each balance sheet date, we record the fair value of the convertible
promissory note with any changes in the fair value recorded in the condensed consolidated statements of operations.
We had a balance of $260,000
and $270,000 in noncurrent liabilities as of March 31, 2026, and December 31, 2025, respectively, on our condensed consolidated balance
sheets related to the convertible promissory note payable measured at fair value.
We recorded a gain in fair
value of $10,000 and $20,000 for the three months ended March 31, 2026 and 2025, respectively, on our condensed consolidated statements
of operations related to this convertible promissory note at fair value.
We recorded interest expense
related to this convertible note payable at fair value of $9,863 for both the three months ended March 31, 2026 and 2025. In addition,
we made cash interest payments amounting to $9,863 for both the three months ended March 31, 2026 and 2025, related to the convertible
note payable at fair value.
Nonconvertible Promissory Notes
During the three months
ended March 31, 2025, we issued a nonconvertible promissory note and received proceeds $250,000. We did not issue new nonconvertible promissory
notes during the three months ended March 31, 2026. As of March 31, 2026, we had eleven outstanding unsecured nonconvertible promissory
notes in the aggregate amount of $5,080,000, which bear interest at a rate of 10% per annum and mature between November 2026 and October
2030.
As of both March 31, 2026
and December 31, 2025, we had a balance of $500,000, recorded as current liabilities and $4,580,000 in noncurrent liabilities on our condensed
consolidated balance sheets related to these unsecured nonconvertible promissory notes.
We recorded interest expense
related to these nonconvertible promissory notes of $127,000 and $99,083 for the three months ended March 31, 2026 and 2025, respectively.
We made interest payments of $125,778 and $97,000 for the three months ended March 31, 2026 and 2025, respectively, related to the nonconvertible
promissory notes.
Nonconvertible Unsecured Promissory Note – Socialyte Promissory Note
In connection with the purchase
agreement for the acquisition of Socialyte (“Socialyte Purchase Agreement”), we entered into a promissory note with the sellers
of Socialyte (“the Socialyte Promissory Note”) amounting to $3,000,000. The Socialyte Promissory Note matured on September
30, 2023 and was payable in two payments: $1,500,000 on June 30, 2023 and $1,500,000 on September 30, 2023. The Socialyte Promissory Note
carries an interest of 4% per annum, which accrues monthly, and all accrued interest was to be due and payable on September 30, 2023.
The Socialyte Purchase Agreement
allows us to offset a working capital deficit against the Socialyte Promissory Note. As such, we deferred these installment payments until
the final post-closing working capital adjustment is agreed upon with the seller of Socialyte. We filed a lawsuit against the seller of
Socialyte and certain of its principals related to the Socialyte Purchase Agreement. See Note 12 to the unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We recorded interest expense
related to this Socialyte Promissory Note of $30,000 for the three months ended March 31, 2026 and 2025, respectively. No interest payments
were made during the three months ended March 31, 2026 and 2025, related to the Socialyte Promissory Note.
Nonconvertible Promissory Note from Related Parties
On June 21, 2021, we issued
Dolphin Entertainment LLC (“DE LLC”), an entity wholly owned by our CEO, Bill O’Dowd, a nonconvertible promissory note
with a principal balance of $1,107,873 which was to mature on December 31, 2026. On April 29, 2024 and June 10, 2024, we issued two nonconvertible
promissory notes to DE LLC in the amounts of $1,000,000 and $135,000, respectively, which were to mature on April 29, 2029 and June 10,
2029, respectively, (collectively, “the DE LLC Notes”). The DE LLC Notes each bore interest at a rate of 10% per annum.
On May 12, 2025, we entered
into an exchange agreement (the “Exchange Agreement”) with DE LLC, pursuant to which, we and DE LLC agreed to exchange the
three DE LLC Notes in the aggregate principal amount of $2,242,873 currently held by DE LLC for three convertible promissory notes (the
“DE New Notes”) in the same principal amounts. As consideration for the exchange, we and DE LLC agreed to extend the maturity
dates on each of the notes by six months. One note, with a principal balance of $1,107,873 now matures on June 30, 2027, one note with
a principal balance of $1,000,000 now matures on October 29, 2029 and one note with a principal balance of $135,000, now matures on December
10, 2029. The DE New Notes continue to bear interest at a rate of 10% per annum. DE LLC may convert the principal balance of the DE New
Notes and any accrued interest thereon at any time before the maturity date of the DE New Notes into our common stock at a conversion
price of $1.00 per share. We accounted for this exchange as an extinguishment of debt and recorded the difference between the carrying
value of DE LLC Notes and the fair value of the DE New Notes of $0.8 million as a loss from extinguishment of debt in our condensed consolidated
statement of operations for the year ended December 31, 2025.
As of March 31, 2026 and
December 31, 2025, we had an aggregate principal balance of $2,839,556 and $2,904,357, respectively, related to the DE New Notes under
the caption convertible note payable – related party in our condensed consolidated balance sheets. During the three months ended
March, 31, 2026 and 2025, we did not repay any principal balance or make interest payments on the DE LLC Notes or DE New Notes.
We recorded interest expense
of $55,304 for both the three months ended March 31, 2026 and 2025 related to the DE LLC Notes and the DE New Notes. As of March 31, 2026
and December 31, 2025, we had a balance in accrued interest – related parties of $543,358 and $488,054, respectively, on our condensed
consolidated balance sheets related to the DE LLC Notes.
Mock Notes
During 2024, we issued three
nonconvertible promissory notes to Mr. Donald Scott Mock, the brother of Mr. O’Dowd, in the amount of $900,000, $75,000 and $8,112,
respectively, and received proceeds of $983,112. The Mock Notes bear interest at a rate of 10% per annum and mature on January 16, 2029,
May 28, 2029 and December 30, 2029, respectively.
As of both March 31, 2026
and December 31, 2025, we had a principal balance of $983,112 related to the Mock Notes under the caption loans from related party in
our condensed consolidated balance sheets. For the three months ended March 31, 2026 and 2025, we did not repay any principal balance
on the Mock Notes. During the three months ended March 31, 2026, we made interest payments in the amount of $24,578 related to the Mock
Notes. No interest payments were made during the three months ended March 31, 2025 related to the Mock Notes.
We recorded interest expense
of $24,578 for both the years ended December 31, 2025 and 2024 related to the Mock Notes. As of March 31, 2026 and December 31, 2025,
we had a balance in accrued interest – related parties of $188,728 on our condensed consolidated balance sheets related to the Mock
Notes.
BankUnited Loan Agreement
On September 29, 2023, we
entered into a loan agreement with BankUnited (“BankUnited Loan Agreement”) in which an existing term loan with BankProv was
repaid (the “Refinancing Transaction”). The BankUnited Loan Agreement includes: (i) $5,800,000 secured term loan (“First
BKU Term Loan”), (ii) and $750,000 of a secured revolving line of credit (“BKU Line of Credit”) and (iii) $400,000 Commercial
Card (“BKU Commercial Card”). The First BKU Term Loan carries a 1.0% origination fee and matures in September 2028, the BKU
Line of Credit carries an initial origination fee of 0.5% and a 0.25% fee on each annual anniversary and matures in September 2026; the
BKU Commercial Card does not have any initial or annual fee and matures in September 2026. The First BKU Term Loan has a declining prepayment
penalty equal to 5% in year one, 4% in year two, 3% in year three, 2% in year four and 1% in year five of the outstanding balance. The
BKU Line of Credit and BKU Commercial Card can be repaid without any prepayment penalty.
On December 6, 2024, we
entered into a second Bank United Loan Agreement (“Second BKU Term Loan”) for $2.0 million to finance the acquisition of Elle
Communications, LLC. The Second BKU Term Loan carries a 1.0% origination fee and matures in December 2027. Similar to the First BKU Term
Loan, the Second BKU Term Loan has a declining prepayment penalty equal to 3% in year one, 2% in year two and 1% in year three of the
outstanding balance. (The First BKU Term Loan, Second BKU Term Loan, BKU Line of Credit and BKU Commercial Card are collectively referred
to as the “Bank United Credit Facility”).
Interest accrues at 8.10%
fixed rate per annum on the First BKU Term Loan and 7.10% fixed rate per annum on the Second BKU Term Loan. Principal and interest are
payable on a monthly basis based on a 5-year amortization for the First BKU Term Loan and 3-year amortization for the Second BKU Term
Loan. Interest on the BKU Line of credit is payable on a monthly basis, with all principal due at maturity. The BKU Commercial Card payment
is due in full at the end of each bi-weekly billing cycle. During the three months ended March 31, 2026 and 2025, we did not used the
BKU Commercial Card. During the three months ended March 31, 2026 and 2025, we made payments in the amount of $354,621, inclusive of $68,625
and $90,722 of interest related to the First BKU Term Loan, respectively. During the three months ended March 31, 2026 and 2025, we made
payments in amount of $185,995, inclusive of $23,827 and $32,187, respectively, of interest related to the Second BKU Term Loan.
Interest on the BKU Line
of Credit is variable based on the Lender’s Prime Rate. During the three months ended March 31, 2026 and 2025, the Company recorded
interest expense and made payments of $6,778 and $7,550, respectively, related to the BKU Line of Credit.
As of March 31, 2026, we
had a balance of $1,852,548 classified as current liabilities and $2,502,601 classified as noncurrent liabilities, net of $58,894 of debt
issuance costs, in our condensed consolidated balance sheet related to the First BKU Term Loan and the Second BKU Term Loan. As of December
31, 2025, we had a balance of $1,813,760 classified as current liabilities and $2,976,930 classified as noncurrent liabilities, net of
$71,518 of debt issuance costs, in our condensed consolidated balance sheet related to the First BKU Term Loan and the Second BKU Term
Loan. As of March 31, 2026 and December 31, 2025, we had a balance of $400,000 of principal outstanding under the BKU Line of Credit.
Amortization of debt origination
costs under the Bank United Credit Facility is included as a component of interest expense in the condensed consolidated statements of
operations and amounted to approximately $12,624 and $7,012, respectively, for both the three months ended March 31, 2026 and 2025.
The BankUnited Credit Facility
contains financial covenants tested semi-annually, on June 30th and December 31st , on a trailing twelve-month basis
that require us to maintain a minimum debt service coverage ratio of 1.25:1.00 and a maximum funded debt/EBITDA ratio of 3.00:1.00. In
addition, the BankUnited Credit Facility contains a liquidity covenant that requires us to hold a cash balance at BankUnited with a daily
minimum deposit balance of $2,000,000. As of March 31, 2026, we believe we are in compliance with the debt covenants.
Critical Accounting Estimates
The preparation of financial
statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management
to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related
notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates
its accounting policies, estimates and judgments on an on-going basis. Management bases its estimates and judgments on historical experience
and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under
different assumptions and conditions. Our significant accounting policies are discussed in Note 2 to our Consolidated Financial Statements
in our Annual Report on Form 10-K for the year ended December 31, 2025.
An accounting policy is
considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate
that are reasonably likely to occur, could materially impact the consolidated financial statements.
We consider the
fair value estimates, including those related to acquisitions, valuations of goodwill, intangible assets and convertible debt to be
the most critical in the preparation of our consolidated financial statements as they are important to the portrayal of our
financial condition and require significant or complex judgment and estimates on the part of management.
Recent Accounting Pronouncements
For a discussion of recent
accounting pronouncements, see Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on
Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, as well as
statements, other than historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate
will or may occur in the future. These statements are often characterized by terminology such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” ”intends,”
“target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential,” “goal” or “continue” or the negative of these terms or other similar expressions.
Forward-looking statements
are based on assumptions and assessments made in light of our experience and perception of historical trends, current conditions, expected
and future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties, many of which are outside of our control. You should not place undue reliance on these forward-looking
statements, which reflect our views only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update
these forward-looking statements in the future, except as required by applicable law.
Risks that could cause actual
results to differ materially from those indicated by the forward-looking statements include those described as “Risk Factors”
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on the Effectiveness of Disclosure Controls
and Procedures
Disclosure controls and
procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed
or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief
Executive Officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of March 31, 2026. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were not effective due to material weaknesses disclosed in our Annual Report on Form 10-K for the
year ended December 31, 2025, filed with the SEC on March 27, 2026, which have not been remediated as of the date of the filing of this
report.
Remediation of Material Weaknesses in Internal Control over Financial
Reporting
We have begun the process
of designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate
the material weaknesses. Our internal control remediation efforts include the following:
| · | Developing formal policies and procedures over the Company’s fraud risk assessment and risk management function; |
| · | Developing policies and procedures to enhance the precision of management review of financial statement information and control impact of changes in the external environment; |
| · | We have entered into an agreement with a third-party consultant that assists us in analyzing complex transactions and the appropriate accounting treatment; |
| · | We have implemented a new enterprise resource planning systems that will allow us to setup proper review and approval of transactions; |
| · | We are enhancing our policies, procedures and documentation of period end closing procedures; |
| · | Implementing policies and procedures to enhance independent review and documentation of journal entries, including segregation of duties; and |
| · | Reevaluating our monitoring activities for relevant controls. |
Management is beginning the
process of implementing and monitoring the effectiveness of these and other processes, procedures and controls and will make any further
changes deemed appropriate. Management believes our planned remedial efforts will effectively remediate the identified material weaknesses.
As we continue to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary
to take additional measures to address control deficiencies or determine it necessary to modify the remediation plan described above.
Changes in Internal Control over Financial Reporting
During the most recently
completed fiscal quarter, there have been no changes in our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting for the fiscal quarter covered by this report.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 21, 2024, the Company
filed a complaint in Los Angeles County Superior Court against NSL Ventures (“NSL”), the Socialyte seller, and its principals
alleging that the defendants breached the Socialyte Purchase Agreement and committed acts of fraud and negligence in connection with that
transaction, and that the Company is entitled to monetary damages caused by those acts. On September 16, 2024, the defendants answered
the Complaint with a general denial and affirmative defenses. Also on September 16, 2024, defendant NSL also filed a Cross-complaint
against the Company and Social Midco, LLC, alleging a single cause of action for breach of contract. The Company and Social Midco answered
the Cross-complaint on October 1, 2024. As the case has progressed, the court appointed an independent accountant
to adjudicate certain accounting issues relevant to the case. That independent accountant’s work is ongoing. In April 2026, the
Court rejected Defendants’ attempt to dismiss the Company’s claims. Trial in the matter is scheduled for April 2027. Due to
the stage of the proceedings an estimate of any possible loss or range of loss cannot be made at this time. The Company may be subject
to legal proceedings, claims, and liabilities that arise in the ordinary course of business. In the opinion of management and based upon
the advice of its outside counsels, the liability, if any, from any pending litigation is not expected to have a material effect in the
Company’s financial position, results of operations and cash flows.
ITEM 1A. RISK FACTORS
Not required for a “smaller reporting company.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
No officers or directors, as defined in Rule
16a-1(f),
S-K Item 408, during the quarter ended March 31, 2026.
The following information is included in this
Item 5 in lieu of filing a Form 8-K:
Item 1.01 Entry into a Material Definitive Agreement
On May 7, 2026, two of the Company’s
wholly-owned subsidiaries, Shore Fire Media, Ltd. and The Door Marketing Group, LLC (collectively, the “Borrowers”), executed
a Loan Agreement with certain Lenders and FVP Servicing, LLC (“FVP”), as agent for the Lenders providing for (i) a term loan
in the amount of $2,000,000, (ii) a delayed draw term loan in the amount of $2,000,000 that, subject to certain conditions, will be become
available on November 7, 2026 and (ii) a second delayed draw term loan in the amount of $1,000,000 that, subject to certain conditions,
will become available on May 7, 2027 (the “Loans”). The Loans will bear interest at 12% per annum from the date they are made
and will have a maturity date of May 7, 2029. The Company executed a Guaranty in favor of FVP in connection with the Loan Agreement. In
addition, the Borrowers entered into a Security Agreement pursuant to which they granted FVP and the Lenders a security interest in substantially
all of its assets as collateral for the loan obligations and the Company entered into a Pledge and Security Agreement granting FVP and
the Lenders a security interest in the equity of the Borrowers. Proceeds from the Loans will be for general working capital purposes.
The foregoing descriptions of the Loan Agreement,
Security Agreement and Pledge and Security Agreement are not complete and are qualified in their entirety by reference to the Loan Agreement,
Security Agreement and Pledge and Security Agreement filed herewith as Exhibits 10.1, 10.2 and 10.3, respectively, to this Quarterly Report
on Form 10-Q, and each such exhibit is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation
Under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated herein by
reference.
Item 3.02 Unregistered Sales of Equity Securities.
On May 8, 2026, the Company
entered into two subscription agreements (the “Subscription Agreements”) with investors for two convertible promissory
notes (each a “Notes”) in the aggregate principal amount of $500,000 and received cash proceeds of $500,000. The Notes
bear interest at a rate of 10% per annum and each have a maturity date of May 8, 2031. The noteholders may convert the principal balance
of the Notes and any accrued interest thereon at any time before the maturity date of the Notes into common stock of the Company (“Common
Stock”) a purchase price of $1.43 per share. The conversion prices for these Notes were either above or the closing price of
the Common Stock on the Nasdaq Stock Market on the respective dates of those Notes.
The foregoing description
of the terms of the Subscription Agreements, the Notes, and the transactions contemplated thereby does not purport to be complete and
is qualified in its entirety by reference to the form of Subscription Agreement and the form of Note, which are included as Exhibits 4.1
and 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2023 and are
incorporated herein by reference.
The issuance and sale of the
Notes, and any shares of common stock to be issued upon conversion thereof will be issued, by the Company in reliance upon the exemption
from registration provided by Section 4(a)(2) of the Securities Act.
ITEM 6. EXHIBITS
| Exhibit No. | Description | ||
| 3.1* | Amended and Restated Articles of Incorporation of Dolphin Entertainment, Inc., as amended (Incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 13, 2025) |
||
| 3.2 | Bylaws of Dolphin Digital Media, Inc. dated as of December 3, 2014 (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K, filed on December 9, 2014) | ||
| 10.1* | Loan Agreement dated May 7, 2026 between Shore Fire Media, Ltd., The Door Marketing Group, LLC and FPV Servicing LLC | ||
| 10.2* | Security Agreement dated May 7, 2026 between Shore Fire Media, Ltd., The Door Marketing Group, LLC and FPV Servicing LLC | ||
| 10.3* | Pledge and Security Agreement dated May 7, 2026 between Dolphin Entertainment, Inc. and FPV Servicing LLC | ||
| 31.1* | Certification of Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
||
| 31.2* | Certification of Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
||
| 32.1# | Certification of Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
||
| 32.2# | Certification of Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
||
| 101.INS* | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase |
||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase |
||
| 101.SCH* | Inline XBRL Taxonomy Extension Presentation Linkbase |
||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
||
| * | Filed herewith. | |
| # | Furnished herewith. |
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized May 12, 2026.
Dolphin Entertainment, Inc.
By:/s/William O’Dowd IV
Name: William O’Dowd IV
Chief Executive Officer
By: /s/ Mirta A. Nerini
Name: Mirta A Negrini
Chief Financial Officer
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source www.stocktitan.net ’
