☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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 ☐ No ☒

The number of shares of common stock outstanding was ~~9,689,083~~10,214,052 as of ~~August 10,~~November 9, 2022.


	June 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
ASSETS
Current
Cash and cash equivalents	$	7,185,628	$	7,688,743	$	4,452,562	$	7,688,743
Restricted cash		541,883		541,883		1,140,483		541,883
Accounts receivable:
Trade, net of allowance of $577,029 and $471,535, respectively		4,378,007		4,513,179
Trade, net of allowance of $627,553 and $471,535, respectively						4,757,499		4,513,179
Other receivables		1,816,857		3,583,357		2,061,845		3,583,357
Notes receivable		3,362,154		1,510,137		4,323,153		1,510,137
Other current assets		387,229		450,060		890,645		450,060
Total current assets		17,671,758		18,287,359		17,626,187		18,287,359

Capitalized production costs, net		582,412		137,235		1,598,412		137,235
Employee receivable		492,085		366,085		572,085		366,085
Right-of-use asset		5,244,969		6,129,411		7,894,850		6,129,411
Goodwill		20,021,357		20,021,357		20,021,357		20,021,357
Intangible assets, net		5,458,401		6,142,067		5,116,568		6,142,067
Property, equipment and leasehold improvements, net		384,445		473,662		315,004		473,662
Other long-term assets		2,681,228		1,234,275		2,581,005		1,234,275
Total Assets	$	52,536,655	$	52,791,451	$	55,725,468	$	52,791,451

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
LIABILITIES
Current
Accounts payable	$	881,568		$	942,085		$	1,572,855		$	942,085
Notes payable, current portion		513,183			307,685			516,036			307,685
Contingent consideration		500,000			600,000			500,000			600,000
Accrued interest – related party		1,556,546			1,621,437			1,650,635			1,621,437
Accrued compensation – related party		2,625,000			2,625,000			2,625,000			2,625,000
Lease liability, current portion		1,610,779			1,600,107			2,033,780			1,600,107
Deferred revenue		1,189,442			406,373			911,970			406,373
Other current liabilities		5,330,836			6,850,584			5,692,600			6,850,584
Total current liabilities		14,207,354			14,953,271			15,502,876			14,953,271

Notes payable		410,959			868,959			380,859			868,959
Convertible notes payable		2,900,000			2,900,000			2,400,000			2,900,000
Convertible notes payable at fair value		466,255			998,135
Convertible note payable at fair value								420,613			998,135
Loan from related party		1,107,873			1,107,873			1,107,873			1,107,873
Contingent consideration		210,000			3,684,221			205,000			3,684,221
Lease liability		4,309,081			5,132,895			6,581,512			5,132,895
Deferred tax liability		90,655			76,207			97,879			76,207
Warrant liability		40,000			135,000			30,000			135,000
Other noncurrent liabilities		18,915			—			18,915			—
Total Liabilities		23,761,092			29,856,561			26,745,527			29,856,561

Commitments and contingencies (Note 18)

STOCKHOLDERS’ EQUITY
Preferred Stock, Series C, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding at June 30, 2022 and December 31, 2021		1,000			1,000
Common stock, $0.015 par value, 200,000,000 shares authorized, 9,551,958 and 8,020,381 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		143,280			120,306
Additional paid in capital		133,246,100			127,247,928
Preferred Stock, Series C, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding at September 30, 2022 and December 31, 2021								1,000			1,000
Common stock, $0.015 par value, 200,000,000 shares authorized, 9,999,052 and 8,020,381 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively								149,986			120,306
Additional paid-in capital								134,755,491			127,247,928
Accumulated deficit		(104,614,817	)		(104,434,344	)		(105,926,536	)		(104,434,344	)
Total Stockholders’ Equity		28,775,563			22,934,890			28,979,941			22,934,890
Total Liabilities and Stockholders’ Equity	$	52,536,655		$	52,791,451		$	55,725,468		$	52,791,451

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021

Revenues	$	10,290,626		$	8,643,244		$	19,467,735		$	15,820,361		$	9,899,013		$	9,399,432		$	29,366,748		$	25,219,793

Expenses:
Direct costs		939,389			833,511			2,022,279			1,583,931			837,429			991,708			2,941,044			2,578,295
Payroll and benefits		6,983,804			5,622,468			13,930,426			10,892,831			7,030,814			5,875,755			20,947,531			16,770,091
Selling, general and administrative		1,519,835			1,194,704			3,039,605			2,718,658			1,663,288			1,519,812			4,644,264			4,234,309
Acquisition costs														315,800			—			315,800			22,907
Depreciation and amortization		415,547			478,270			832,785			960,982			415,836			475,207			1,248,621			1,436,189
Change in fair value of contingent consideration		(670,878	)		(165,000	)		(1,434,778	)		200,000			(5,000	)		1,110,000			(1,439,778	)		1,310,000
Legal and professional		613,971			457,998			1,552,186			802,606			774,613			498,661			2,317,800			1,301,267
Total expenses		9,801,668			8,421,951			19,942,503			17,159,008			11,032,780			10,471,143			30,975,282			27,653,058

Income (loss) from operations		488,958			221,293			(474,768	)		(1,338,647	)
Loss from operations														(1,133,767	)		(1,071,711	)		(1,608,534	)		(2,433,265	)

Other income (expenses):
Other (expenses) income:
Gain on extinguishment of debt, net		—			1,012,973			—			955,610			—			1,733,400			—			2,689,010
Loss on disposal of fixed assets		—			(48,461	)		—			(48,461	)		—			—			—			(48,461	)
Change in fair value of convertible notes		244,022			268,974			531,880			(602,475	)
Change in fair value of convertible note														45,642			(223,923	)		577,522			(826,398	)
Change in fair value of warrants		35,000			65,000			95,000			(2,497,877	)		10,000			(55,000	)		105,000			(2,552,877	)
Change in fair value of put rights		—			—			—			(71,106	)		—			—			—			(71,106	)
Acquisition costs		—			—			—			(22,907	)
Interest expense		(125,348	)		(169,837	)		(274,737	)		(335,031	)		(126,147	)		(241,115	)		(400,884	)		(576,146	)
Total other income (expenses), net		153,674			1,128,649			352,143			(2,622,247	)
Total other (expenses) income, net														(70,505	)		1,213,362			281,638			(1,385,978	)

Income (loss) before income taxes and equity in losses of unconsolidated affiliates		642,632			1,349,942			(122,625	)		(3,960,894	)
(Loss) income before income taxes and equity in losses of unconsolidated affiliates														(1,204,272	)		141,651			(1,326,896	)		(3,819,243	)

Income tax (expense) benefit		(7,224	)		—			(14,448	)		38,851			(7,224	)		—			(21,672	)		38,851

Net income (loss) before equity in losses of unconsolidated affiliates		635,408			1,349,942			(137,073	)		(3,922,043	)
Net (loss) income before equity in losses of unconsolidated affiliates														(1,211,496	)		141,651			(1,348,568	)		(3,780,392	)

Equity in losses of unconsolidated affiliates		(23,400	)		—			(43,400	)		—			(100,223	)		—			(143,623	)		—

Net income (loss)	$	612,008		$	1,349,942		$	(180,473	)	$	(3,922,043	)
Net (loss) income													$	(1,311,719	)	$	141,651		$	(1,492,191	)	$	(3,780,392	)

Earnings (loss) per share:
(Loss) earnings per share:
Basic	$	0.06		$	0.17		$	(0.02	)	$	(0.53	)	$	(0.14	)	$	0.02		$	(0.16	)	$	(0.50	)
Diluted	$	0.04		$	0.13		$	(0.09	)	$	(0.53	)	$	(0.14	)	$	0.02		$	(0.23	)	$	(0.50	)

Weighted average number of shares outstanding:
Basic		9,498,266			7,664,000			9,113,252			7,456,360			9,664,681			7,740,085			9,307,830			7,551,974
Diluted		9,626,143			7,913,396			9,890,621			7,456,360			9,793,715			7,740,085			9,437,807			7,551,974

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(180,473	)	$	(3,922,043	)	$	(1,492,191	)	$	(3,780,392	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		832,785			960,982			1,248,621			1,436,189
Share-based compensation		114,062			—			166,582			—
Equity in losses of unconsolidated affiliates		43,400			—			143,623			—
Commitment shares issued to Lincoln Park Capital LLC								232,118			—
Bonus payment issued in shares								50,000			17,858
Gain on extinguishment of debt		—			(955,610	)		—			(2,689,010	)
Loss on disposal of fixed assets		—			48,461			—			48,461
Impairment of right-of-use asset		98,857			—			98,857			—
Impairment of capitalized production costs		87,323			20,000			87,323			115,881
Bad debt expense		251,728			84,673			276,579			232,100
Change in fair value of put rights		—			71,106			—			71,106
Change in fair value of contingent consideration		(1,434,778	)		200,000			(1,439,778	)		1,310,000
Change in fair value of warrants		(95,000	)		2,497,877			(105,000	)		2,552,877
Change in fair value of convertible notes		(531,880	)		602,475
Change in fair value of convertible note								(577,522	)		826,398
Change in deferred tax		14,448			(38,851	)		21,672			(38,851	)
Changes in operating assets and liabilities:
Accounts receivable, trade and other		1,536,727			(326,917	)		209,600			(1,278,000	)
Other current assets		62,831			(91,389	)		145,492			(206,762	)
Capitalized production costs		(532,500	)		(95,829	)		(1,548,500	)		(95,829	)
Other long-term assets and employee receivable		(116,353	)		(6,516	)		(196,353	)		(9,744	)
Deferred revenue		(216,931	)		1,263,714			(494,403	)		2,354,336
Accounts payable		(60,517	)		(434,996	)		630,770			(484,741	)
Accrued interest – related party		(64,891	)		(64,894	)		29,198			29,194
Other current liabilities		(1,519,747	)		191,067			(1,157,985	)		117,134
Lease liability		(27,557	)		26,750			17,994			(8,245	)
Other noncurrent liabilities		18,915			—			18,915			—
Net cash (used in) provided by operating activities		(1,719,551	)		30,060			(3,634,388	)		519,960

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(59,902	)		—			(64,464	)		—
Acquisition of B/HI Communications, Inc., net of cash acquired								—			(525,856	)
Issuance of notes receivable		(2,238,800	)		—			(3,108,080	)		—
Acquisition of B/HI Communications, Inc, net of cash acquired		—			(525,856	)
Net cash used in investing activities		(2,298,702	)		(525,856	)		(3,172,544	)		(525,856	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from equity line of credit agreement		4,367,640			—			5,049,100			—
Cash settlement of contingent consideration for B/HI		(600,000	)		—			(600,000	)		—
Proceeds from convertible notes payable		—			3,050,000			—			5,950,000
Repayment of term loan		—			(200,065	)		—			(300,097	)
Repayment of notes payable		(252,502	)		(46,798	)		(279,749	)		(71,463	)
Exercise of put rights		—			(1,015,135	)		—			(1,015,135	)
Net cash provided by financing activities		3,515,138			1,788,002			4,169,351			4,563,305

Net (decrease) increase in cash and cash equivalents and restricted cash		(503,115	)		1,292,206			(2,637,581	)		4,557,409
Cash and cash equivalents and restricted cash, beginning of period		8,230,626			8,637,376			8,230,626			8,637,376
Cash and cash equivalents and restricted cash, end of period	$	7,727,511		$	9,929,582		$	5,593,045		$	13,194,785

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Six Months Ended June 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Interest paid	$	454,975	$	311,151	$	554,897	$	495,722

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of shares to Lincoln Park Capital LLC	$	4,367,640	$	—
Issuance of commitment shares to Lincoln Park Capital LLC					$	232,118	$	—
Receipt of Crafthouse equity in connection with marketing agreement	$	1,000,000	$	—	$	1,000,000	$	—
Settlement of contingent consideration for B/HI and The Door in shares of common stock					$	1,539,444	$	—
Principal balance of convertible notes converted into shares of common stock	$	—	$	2,545,000	$	500,000	$	3,745,000
Issuance of shares of common stock related to the acquisitions	$	—	$	350,000	$	—	$	350,000
Put rights exchanged for shares of common stock	$	—	$	600,000	$	—	$	600,000
Interest on notes paid in stock	$	—	$	8,611	$	—	$	8,611
Settlement of contingent consideration for B/HI and The Door in shares of common stock	$	1,539,444	$	—
Employee bonus paid in stock					$	50,000	$	17,858

Reconciliation of cash, cash equivalents and restricted cash. 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:

	Six Months Ended June 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Cash and cash equivalents	$	7,185,628	$	9,252,228	$	4,452,562	$	12,652,902
Restricted cash		541,883		677,354		1,140,483		541,883
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows	$	7,727,511	$	9,929,582
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows					$	5,593,045	$	13,194,785

The accompanying notes are an integral part of these condensed consolidated financial statements.


For the three and six months ended June 30, 2022
For the three and nine months ended September 30, 2022																		For the three and nine months ended September 30, 2022
									Additional						Total												Additional						Total
	Preferred Stock				Common Stock				Paid-in			Accumulated			Stockholders'				Preferred Stock				Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity				Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance December 31, 2021		50,000	$	1,000		8,020,381	$	120,306	$	127,247,928		$	(104,434,344	)	$	22,934,890				50,000	$	1,000		8,020,381	$	120,306	$	127,247,928		$	(104,434,344	)	$	22,934,890
Net loss for the three months ended March 31, 2022		—		—		—		—		—			(792,481	)		(792,481	)			—		—		—		—		—			(792,481	)		(792,481	)
Issuance of shares to Lincoln Park Capital LLC		—		—		622,019		9,330		2,506,020			—			2,515,350				—		—		622,019		9,330		2,506,020			—			2,515,350
Issuance of restricted shares, net of shares withheld for taxes		—		—		8,645		130		(130	)		—			—
Issuance of common stock on vesting of restricted stock units, net of shares withheld for taxes																				—		—		8,645		130		(130	)		—			—
Share-based compensation		—		—		—		—		59,305			—			59,305				—		—		—		—		59,305			—			59,305
Balance March 31, 2022		50,000	$	1,000		8,651,045	$	129,766	$	129,813,123		$	(105,226,825	)	$	24,717,064				50,000	$	1,000		8,651,045	$	129,766	$	129,813,123		$	(105,226,825	)	$	24,717,064
Net income for the three months ended June 30, 2022		—		—		—		—		—			612,008			612,008				—		—		—		—		—			612,008			612,008
Issuance of shares to Lincoln Park Capital LLC		—		—		450,000		6,750		1,845,540			—			1,852,290				—		—		450,000		6,750		1,845,540			—			1,852,290
Issuance of restricted shares, net of shares withheld for taxes		—		—		7,982		120		(120	)		—			—
Issuance of common stock on vesting of restricted stock units, net of shares withheld for taxes																				—		—		7,982		120		(120	)		—			—
Issuance of shares to sellers of The Door Marketing Group LLC for earnout consideration		—		—		279,562		4,193		1,019,004			—			1,023,197				—		—		279,562		4,193		1,019,004			—			1,023,197
Issuance of shares to seller of B/HI Communication Inc for earnout consideration		—		—		163,369		2,451		513,796			—			516,247				—		—		163,369		2,451		513,796			—			516,247
Share-based compensation		—		—		—		—		54,757			—			54,757				—		—		—		—		54,757			—			54,757
Balance June 30, 2022		50,000	$	1,000		9,551,958	$	143,280	$	133,246,100		$	(104,614,817	)	$	28,775,563				50,000	$	1,000		9,551,958	$	143,280	$	133,246,100		$	(104,614,817	)	$	28,775,563
Net loss for the three months ended September 30, 2022																				—		—		—		—		—			(1,311,719	)		(1,311,719	)
Issuance of shares related to conversion of note payable																				—		—		125,604		1,884		498,116			—			500,000
Issuance of shares to Lincoln Park Capital LLC																				—		—		302,313		4,534		909,043			—			913,577
Issuance of common stock on vesting of restricted stock units, net of shares withheld for taxes																				—		—		7,656		115		(115	)		—			—
Issuance of shares related to employment agreement																				—		—		11,521		173		49,827			—			50,000
Share-based compensation																				—		—		—		—		52,520			—			52,520
Balance September 30, 2022																				50,000	$	1,000		9,999,052	$	149,986	$	134,755,491		$	(105,926,536	)	$	28,979,941

The accompanying notes are an integral part of these condensed consolidated financial statements.

For the three and six months ended June 30, 2021
For the three and nine months ended September 30, 2021																				For the three and nine months ended September 30, 2021
											Additional						Total														Additional						Total
	Preferred Stock				Common Stock						Paid-in			Accumulated			Stockholders'				Preferred Stock				Common Stock						Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Capital			Deficit			Equity				Shares		Amount		Shares			Amount			Capital			Deficit			Equity
Balance December 31, 2020		50,000	$	1,000		6,618,785		$	99,281		$	117,540,557		$	(97,972,041	)	$	19,668,797				50,000	$	1,000		6,618,785		$	99,281		$	117,540,557		$	(97,972,041	)	$	19,668,797
Net income for the three months ended March 31, 2021		—		—		—			—			—			(5,271,985	)		(5,271,985	)			—		—		—			—			—			(5,271,985	)		(5,271,985	)
Issuance of shares related to conversion of note payable		—		—		663,155			9,948			2,543,664			—			2,553,612				—		—		663,155			9,948			2,543,664			—			2,553,612
Issuance of shares related to cashless exercise of warrants		—		—		146,027			2,190			2,795,687			—			2,797,877				—		—		146,027			2,190			2,795,687			—			2,797,877
Issuance of shares issued to seller of Be Social		—		—		103,245			1,549			348,451			—			350,000				—		—		103,245			1,549			348,451			—			350,000
Consideration for acquisition of B/HI Communications, Inc						—			—			31,158			—			31,158								—			—			31,158			—			31,158
Issuance of shares related to exchange of Put Rights for stock		—		—		77,519			1,163			356,199			—			357,362				—		—		77,519			1,163			356,199			—			357,362
Shares retired from exercise of puts		—		—		(3,254	)		(51	)		51			—			—				—		—		(3,254	)		(51	)		51			—			—
Balance March 31, 2021		50,000	$	1,000		7,605,477		$	114,080		$	123,615,767		$	(103,244,026	)	$	20,486,821				50,000	$	1,000		7,605,477		$	114,080		$	123,615,767		$	(103,244,026	)	$	20,486,821
Net loss for the three months ended June 30, 2021		—		—		—			—			—			1,349,942			1,349,942				—		—		—			—			—			1,349,942			1,349,942
Issuance of shares related to acquisition of The Door		—		—		10,238			154			(154	)		—			—				—		—		10,238			154			(154	)		—			—
Issuance of shares related to exchange of Put Rights for stock		—		—		37,847			568			348,759			—			349,327				—		—		37,847			568			348,759			—			349,327
Shares retired from exercise of puts		—		—		(15,093	)		(227	)		(13,203	)		—			(13,430	)			—		—		(15,093	)		(227	)		(13,203	)		—			(13,430	)
Balance June 30, 2021		50,000	$	1,000		7,638,469		$	114,575		$	123,951,169		$	(101,894,084	)	$	22,172,660				50,000	$	1,000		7,638,469		$	114,575		$	123,951,169		$	(101,894,084	)	$	22,172,660
Net income for the three months ended September 30, 2021																						—		—		—			—			—			141,651			141,651
Issuance of shares for employee bonus																						—		—		1,935			29			17,829			—			17,858
Shares retired from exercise of puts																						—		—		128,280			1,924			1,198,076			—			1,200,000
Balance September 30, 2021																						50,000	$	1,000		7,768,684		$	116,528		$	125,167,074		$	(101,752,433	)	$	23,532,169

The accompanying notes are an integral part of these condensed consolidated financial statements.

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

Dolphin Entertainment, Inc., a Florida corporation (the “Company,” “Dolphin,” “we,” “us” or “our”), is a leading independent entertainment marketing and premium content development company. Through its acquisitions of 42West LLC (“42West”), The Door Marketing Group, LLC (“The Door”), Shore Fire Media, Ltd (“Shore Fire”), Viewpoint Computer Animation Incorporated (“Viewpoint”), Be Social Public Relations, LLC (“Be Social”) and B/HI Communications, Inc. (“B/HI”), the Company provides expert strategic marketing and publicity services throughout the United States of America (“U.S.”) to virtually all of the major film studios and many of the leading streaming services, as well as to independent and digital content providers, and A-list celebrity talent, including actors, directors, producers, celebrity chefs, social media influencers and recording artists. The Company also provides strategic marketing publicity services and creative brand strategies for a wide variety of consumer brands, including prime hotel and restaurant groups, throughout the U.S. Dolphin’s content production business is a long established, leading independent producer, committed to distributing premium, best-in-class film and digital entertainment. Dolphin produces original feature films and digital programming primarily aimed at family and young adult markets.

~~On March 11, 2020, the World Health Organization categorized a novel coronavirus (“COVID-19”) as a pandemic, and it has~~The continued spread ~~throughout the U.S. The pandemic has had and continues to~~of new COVID-19 variants did not have a significant ~~effect~~impact on ~~economic conditions in the United States, and continues to cause significant uncertainties in the U.S. and global economies. The extent to which the COVID-19 pandemic affects~~ our business ~~operations and financial results depends, and will continue to depend, on numerous evolving factors that we may not be able to accurately predict.~~

~~One of our subsidiaries operates in~~during the food and hospitality sector, which was negatively impacted by the orders to either suspend or reduce operations of restaurants and hotels. Similarly, another subsidiary represents talent, such as actors, directors and producers, and revenues from these clients was negatively impacted by the suspension of content production.quarter ended September 30, 2022. The television and streaming consumption around the globe has increased since the outbreak of COVID-19, as well as the demand for consumer products. Revenues from the marketing of these shows and products somewhat offset the decrease in revenue from the sectors discussed above.

~~Depending on the extent and duration~~future course of the pandemic could have adverse effects in the U.S and ~~the related economic impacts, COVID-19 may continue to~~global economies and thus negatively impact our business and financial ~~results, as well as significant judgements and estimates, including those related to goodwill and other asset impairments and allowances for doubtful accounts.~~results.

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, Viewpoint, Shore Fire, Be Social and B/HI. 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 ~~June~~September 30, 2022, and its results of operations and cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022. The condensed consolidated balance sheet as of December 31, 2021 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, 2021.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

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 as of 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, realizability of notes receivable and impairment assessments for investment in capitalized production costs, goodwill and long-lived assets. Management bases its estimates on historical experience and on other various assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from such estimates under different assumptions and conditions.

Due to COVID-19 and the uncertainty of the extent of the impacts related thereto, certain estimates and assumptions may require increased judgment. As events continue to evolve and additional information becomes available, these estimates may change in future periods. It is difficult to predict what the ongoing impact of the pandemic will be on future periods.

The Company’s significant accounting policies are detailed in "Note 2: Summary of Significant Accounting Policies" within Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. As a result of entering into a collaborative arrangement in June 2022, the Company updated its revenue recognition accounting policy to include the information as detailed below. There were no other significant changes to the Company’s accounting policies during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

The Company analyzes our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, the Company considers whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For collaboration arrangements that are in the scope of the collaboration guidance, we may analogize to the revenue from contracts with ~~customers~~customers’ guidance for some aspects of these arrangements. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated ~~statement~~statements of operations. To date, there has been no revenue generated from collaboration arrangements.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The guidance will be effective for the Company on January 1, 2023. The Company is currently evaluating the impact that the adoption of this standard will have on its condensed consolidated financial statements in connection with any future business combinations.

In June 2016, the FASB issued new guidance on measurement of credit losses (ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”) with subsequent amendments issued in November 2018 (ASU 2018-19) and April 2019 (ASU 2019-04). This update changes the accounting for credit losses on loans and held-to-maturity debt securities and requires a current expected credit loss (CECL) approach to determine the allowance for credit losses. It is applicable to trade accounts receivable. The guidance will be effective for the Company on January 1, 2023 with a cumulative-effect adjustment, if any, to retained earnings as of the beginning of the year of adoption. The Company is in the process of evaluating the impact of the adoption of ASU 2016-13 on the Company’s condensed consolidated financial statements and disclosures.

Certain prior year amounts have been reclassified to conform with current year presentation. These reclassifications had no impact on the Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

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 15.

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. Fees are generally recognized on a straight-line or monthly basis, as the services are consumed by our clients, which approximates the proportional performance on such contracts.

We also enter into management agreements with a roster of social media influencers and are paid a percentage of the revenue earned by the social media influencer. 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.

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 or web series 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 right 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.

Schedule of Revenue by Segment
	For the Three Months Ended June 30,				For the Six Months Ended June 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021

Entertainment publicity and marketing	$	10,290,626	$	8,643,244	$	19,467,735	$	15,820,361	$	9,899,013	$	9,399,432	$	29,366,748	$	25,219,793
Content production		—		—		—		—		—		—		—		—
Total revenues	$	10,290,626	$	8,643,244	$	19,467,735	$	15,820,361
Total Revenues									$	9,899,013	$	9,399,432	$	29,366,748	$	25,219,793

The opening and closing balances of our contract asset and liability balances from contracts with customers as of ~~June~~September 30, 2022 and December 31, 2021 were as follows:

Schedule of contract asset and liability
	Contract Assets			Contract Liabilities
						Contract Assets			Contract Liabilities
Balance as of December 31, 2021	$	62,500		$	406,373	$	62,500		$406,373
Balance as of June 30, 2022		—			1,189,442
Balance as of September 30, 2022							—		911,970
Change	$	(62,500	)	$	783,069	$	(62,500	)	$505,597

Contract assets are comprised of services provided for which consideration has not been received and for which payments are ~~transferred~~not unconditional. The change in the contract asset balance relates to the transfer to accounts receivable when the right to payment becomes unconditional. Contract assets are presented within other current assets in the condensed consolidated balance sheets. ~~The change in the contract asset balance relates to the collection of consideration for services that had been previously performed.~~

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

Contract liabilities are recorded when the Company receives advance payments from customers for public relations projects or as deposits for promotional or brand-support 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 short duration and are recognized once the performance obligation of the contract is met. Contract liabilities are presented within deferred revenue in the condensed consolidated balance sheets. The change in the contract liability balance relates to the advanced consideration received from customers under the terms of our contracts, primarily related to ~~periodic retainer~~ fees, ~~and, to a lesser extent, reimbursement of third party expenses,~~ which are generally recognized shortly after billing.

Revenues for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 include the following:

Schedule of Revenues
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021

Amounts included in the beginning of year contract liability balance	$	15,000	$	—	$	329,937	$	337,221	$	—	$	10,000	$	329,937	$	347,221

As of ~~June~~September 30, 2022, we had approximately $~~1,189,442~~911,970 of unsatisfied performance obligations, of which $~~1,001,943~~849,469 are expected to be recognized in the next twelve months, with the remainder recognized between twelve and ~~seventeen~~fourteen months from ~~June~~September 30, 2022.

As of ~~June~~September 30, 2022, the Company has a balance of $20,021,357 of goodwill on its condensed consolidated balance sheet arising from the prior acquisitions of 42West, The Door, Viewpoint, Shore Fire, Be Social and B/HI. All of the Company’s goodwill is related to the entertainment, publicity and marketing segment. There were no changes in the carrying value of goodwill during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

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 ~~(3)~~(4) an adverse action or assessment by a regulator. There were no triggering events noted during the three and ~~six months~~nine month period ended ~~June~~September 30, 2022, that would require the Company to reassess goodwill for impairment outside of its regular annual impairment test.

Finite-lived intangible assets consisted of the following as of ~~June~~September 30, 2022 and December 31, 2021:

Schedule of Intangible Assets
	June 30, 2022						December 31, 2021						September 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	8,290,000	$	5,314,182	$	2,975,818	$	8,290,000	$	4,880,016	$	3,409,984	$	8,290,000	$	5,531,265	$	2,758,735	$	8,290,000	$	4,880,016	$	3,409,984
Trademarks and trade names		4,490,000		2,037,417		2,452,583		4,490,000		1,797,917		2,692,083		4,490,000		2,157,167		2,332,833		4,490,000		1,797,917		2,692,083
Non-compete agreements		690,000		660,000		30,000		690,000		650,000		40,000		690,000		665,000		25,000		690,000		650,000		40,000
	$	13,470,000	$	8,011,599	$	5,458,401	$	13,470,000	$	7,327,933	$	6,142,067	$	13,470,000	$	8,353,432	$	5,116,568	$	13,470,000	$	7,327,933	$	6,142,067

Amortization expense associated with the Company’s intangible assets was $341,833 and $394,998 for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and $~~683,666~~1,025,499 and $~~789,996~~1,184,994 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

Amortization expense related to intangible assets for the remainder of 2022 and thereafter is as follows:

Schedule of amortization expense related to intangible assets for the next five years
2022	$	683,666	$	341,833
2023		1,227,824		1,227,824
2024		991,715		991,715
2025		961,373		961,373
2026		934,001		934,001
Thereafter		659,824		659,822
Total	$	5,458,401	$	5,116,568

Effective January 1, 2021, the Company acquired all of the issued and outstanding shares of B/HI, a California corporation (the “B/HI Purchase”) pursuant to a share purchase agreement (the “B/HI Share Purchase Agreement”) between the Company and Dean G. Bender and Janice L. Bender, as co-trustees of the Bender Family Trust dated May 6, 2013 (collectively, the “B/HI Sellers). B/HI is an entertainment public relations agency that specializes in corporate and product communications programs for interactive gaming, e-sports, entertainment content and consumer product organizations.

The total consideration paid to the B/HI Seller in respect to the B/HI Purchase is $0.8 million of shares of common stock based on a 30-day trailing trading average closing price immediately prior to, but not including, the applicable payment date adjusted for working capital, cash targets and the B/HI indebtedness as defined in the B/HI Share Purchase Agreement. During 2021, subsequent to the initial measurement, the B/HI Seller achieved certain financial performance targets pursuant to the B/HI Share Purchase Agreement and earned an additional $1.1 million, which was paid by $0.6 million in cash and the remainder in common stock, which was settled by the issuance of 163,369 shares of common stock during the second quarter of 2022 pursuant to the B/HI Share Purchase Agreement. The common stock issued as part of the consideration has not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Acquisition related costs for the B/HI purchase amounted to $22,907 and are included in acquisition costs in the condensed consolidated ~~statement~~statements of operations for the ~~six~~nine months ended ~~June~~September 30, 2021. The condensed consolidated ~~statement~~statements of operations includes revenues from B/HI amounting to $~~818,408~~1,082,856 and $~~1,426,841~~2,509,697 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The measurement period of the BHI purchase ended January 1, 2022.

The notes receivable held by the Company are unsecured convertible note receivables from JDDC Elemental LLC (“Midnight Theatre”) (the “Notes Receivable”). The Notes Receivable are recorded at their principal face amount plus accrued interest. Due to their short-term maturity and conversion terms, these have been recorded at the face value of the note and an allowance for credit losses has not been established.

As of ~~June~~September 30, 2022, the Midnight Theatre notes amount to $~~3,362,154~~4,323,153, inclusive of $~~123,354~~215,073 of interest receivable, and are convertible at the option of the Company into Class A and B Units of Midnight Theatre. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, Midnight Theatre issued ~~four~~nine and ~~seven~~sixteen unsecured convertible promissory notes, respectively, to the Company (the “Midnight Theatre Notes”) with an aggregate principal of $~~1,084,300~~869,280 and $~~2,238,800~~3,108,080 respectively, each with a ten percent (10%) per annum simple coupon rate, which have maturity dates six months from their respective issuance date. Before their initial maturity date, the maturity date of the Midnight Theatre Notes was extended for an additional six months, and now mature between January and March 2023. The Midnight Theatre Notes allow the Company to convert the principal and accrued interest into Class A and B units of Midnight Theatre on the respective maturity date.

~~Subsequent to June 30, 2022, on each of July 11, 2022 and July 21, 2022, we issued Midnight Theatre two additional notes amounting to $341,660~~ ~~in aggregate on the same terms as the previous notes.~~

On November 30, 2021, Crafthouse Cocktails issued a $500,000 unsecured convertible promissory note (the “Crafthouse Note”) to the Company with an eight percent (8%) per annum simple coupon rate and a mandatorily redeemable date of February 1, 2022. The Crafthouse Note allows the Company to convert the principal and accrued interest into membership interests of Crafthouse on the mandatory conversion date. On February 1, 2022, the Crafthouse Note was converted and Dolphin was issued memberships interests of Crafthouse Cocktails; refer to Note 6. There have been 0no notes receivable issued ~~from~~to Crafthouse Cocktails during the three and ~~six~~nine months ended ~~June~~September 30, 2022, and 0no notes receivable ~~from Crathouse Cocktails~~ remain outstanding as of ~~June~~September 30, 2022.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

Equity method investments are included within other long-term assets in the condensed consolidated balance sheets. As of ~~June~~September 30, 2022, the investment in Midnight Theatre and Crafthouse Cocktails amounted to $~~1,000,000~~939,214 and $~~1,456,600~~1,417,163, respectively.

Hidden Leaf, the restaurant at Midnight Theatre, commenced operations in ~~late June~~early July 2022. ~~The equity in earnings or losses during~~During both the three and ~~six~~nine months ended ~~June~~September 30, 2022, ~~were negligible, and thus have not been recorded. The~~the Company ~~expects to commence recording equity~~recorded a loss of $60,786, in ~~earnings or losses related to~~connection with its equity method investment in Midnight ~~Theatre during the third quarter of 2022.~~Theatre. The theater opened with limited capacity in late September 2022 and is expected to fully open in January 2023.

During the ~~six~~nine months ended ~~June~~September 30, 2022, the Crafthouse Note discussed in Note 5 was converted and Dolphin was issued common memberships interests of Crafthouse Cocktails. During the ~~three and six~~nine months ended ~~June~~September 30, 2022, the Company received an additional $1,000,000 of equity investment in Stanton South LLC in connection with an agreement to render marketing services to Crafthouse Cocktails during a two-year term commencing on November 15, 2021. In addition, during the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company recorded ~~a loss~~losses of $~~23,400~~39,437 and $~~43,400~~82,837, respectively, in connection with its equity method investment in Crafthouse Cocktails.

Total debt of the Company was as follows as of ~~June~~September 30, 2022 and December 31, 2021:

Schedule of debt
Debt Type	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
Convertible notes payable	$	2,900,000		$	2,900,000		$	2,400,000		$	2,900,000
Convertible notes payable - fair value option		466,255			998,135
Convertible note payable - fair value option								420,613			998,135
Non-convertible promissory notes		924,142			1,176,644			896,895			1,176,644
Loans from related party (see Note 9)		1,107,873			1,107,873			1,107,873			1,107,873
Total debt	$	5,398,270		$	6,182,652		$	4,825,381		$	6,182,652
Less current portion of debt		(513,183	)		(307,685	)		(516,036	)		(307,685	)
Noncurrent portion of debt	$	4,885,087		$	5,874,967		$	4,309,345		$	5,874,967

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

The table below details the maturity dates of the principal amounts for the Company’s debt as of ~~June~~September 30:

As of ~~June~~September 30, 2022, the Company has ~~three~~two outstanding convertible promissory notes in the aggregate principal amount of $~~2,900,000~~2,400,000. The convertible promissory notes bear interest at a rate of 10% per annum, ~~and mature~~with initial maturity dates on the second anniversary of their respective issuances. The maturity date of each convertible promissory note has been extended by one year. The balance of each convertible promissory note and any accrued interest may be converted at the noteholder’s option at any time at a purchase price based on a 90-day average closing market price per share of the common stock but not at a price less than $2.50 per share.

The Company recorded interest expense related to ~~these~~ convertible notes payable of $~~67,500~~80,278 and $~~15,565~~88,000 during the three months ended ~~June~~September 30, 2022 and 2021, respectively, and $~~135,000~~215,278 and $~~42,482~~130,482 during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. In addition, the Company made cash interest payments amounting to $~~135,000~~199,445 and $~~31,149~~109,176 during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively, related to the convertible promissory notes.

As of ~~both June~~September 30, 2022 and December 31, 2021, the principal balance of the convertible promissory notes of $2,400,000 and $2,900,000, respectively, was recorded in noncurrent liabilities under the caption ~~convertible promissory notes~~“Convertible Notes Payable” on the Company’s condensed consolidated balance sheets.

During the three and nine months ended ~~Subsequent to June~~September 30, 2022, on August 8, 2022, the holder of one convertible ~~promissory~~ note issued during 2021 converted the principal balance of $500,000 into 125,604 shares of common stock at a conversion price of $3.98 per share. At the moment of conversion, accrued interest related to this note amounted to $5,278 and was paid in cash.

Subsequent to September 30, 2022, on October 4, 2022, October 18, 2022 and November 3, 2022, the Company issued three convertible promissory notes in the aggregate amount of $1,300,000. The convertible promissory notes bear interest at 10% per annum, mature on the second anniversary of their issuance and can be converted into shares of common stock, at the noteholder’s option at any time, at a purchase price based on a 90-day average closing market price per share of the common stock. Two of the convertible notes may not be converted at a price less than $2.50 per share and one of the convertible notes may not be converted at a price less than $2.00 per share.

The Company had one convertible promissory note outstanding with aggregate principal amount of $500,000 as of ~~June~~September 30, 2022 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, the Company records the fair value of the convertible promissory notes with any changes in the fair value recorded in the condensed consolidated statements of operations.

The Company had a balance of $~~466,255~~420,613 and $998,135 in noncurrent liabilities as of ~~June~~September 30, 2022 and December 31, 2021, respectively, on its condensed consolidated balance sheets related to the convertible promissory note measured at fair value.

The Company recorded ~~gains~~a gain in fair value of $~~244,022~~45,642 and a loss in fair value of $~~268,974~~223,923 for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and a gain in fair value of $~~531,880~~577,522 and a loss in fair value of $~~602,475~~826,398 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively, on its condensed consolidated statements of operations related to this convertible promissory note at fair value.

The Company recorded interest expense related to ~~these~~the convertible ~~notes~~note payable at fair value of $9,863 for both the three months ended ~~June~~September 30, 2022 and 2021, and $~~19,726~~29,589 for both the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. In addition, the Company made cash interest payments amounting to $~~19,726~~29,589 for both the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, related to the convertible promissory notes at fair value.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

As of ~~June~~September 30, 2022, the Company has outstanding unsecured nonconvertible promissory notes in the aggregate amount of $~~924,142~~896,895, which bear interest at a rate of 10% per annum and mature between June and December 2023. On January 15, 2022, its maturity date, a non-convertible promissory note amounting to $~~0.2~~0.3 million was repaid in cash.

As of ~~June~~September 30, 2022 and December 31, 2021, the Company had a balance of $~~513,183~~516,036 and $307,685, respectively, net of debt discounts recorded as current liabilities and $~~410,959~~380,859 and $868,959, respectively, in noncurrent liabilities on its condensed consolidated balance sheets related to these nonconvertible promissory notes.

The Company recorded interest expense related to these nonconvertible promissory notes of $~~23,393~~22,719 and $~~30,927~~30,317 for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and $~~48,277~~70,996 and $~~62,449~~92,765 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. The Company made interest payments of $~~50,249~~73,127 and $~~62,726~~93,186 during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively, related to the nonconvertible promissory notes.

The Company issued Dolphin Entertainment, LLC (“DE LLC”), an entity wholly owned by the Company’s Chief Executive Officer, William O’Dowd (the “CEO”), a promissory note (the “DE LLC Note”) which matures on July 31, ~~2023.~~2024.

As of both ~~June~~September 30, 2022 and December 31, 2021, the Company had a principal balance of $1,107,873, and accrued interest amounted to $~~110,787~~138,712 and $55,849 as of ~~June~~September 30, 2022 and December 31, 2021, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company did not repay any principal balance on the DE LLC Note.

The Company recorded interest expense of $~~27,621~~27,924 for both the three months ended ~~June~~September 30, 2022 and 2021, and $~~54,938~~82,863 for both the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, ~~respectively,~~ related to this loan from related party. The Company did not make cash payments during the ~~six~~nine months ended ~~June~~September 30, 2022, related to this loan from related party. The Company made cash interest payments amounting to $81,621 during the ~~six~~nine months ended ~~June~~September 30, 2021, related to this loan from related party.

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 are representative of their fair values because of the short turnover of these instruments.

The tables below set forth information related to the Company’s consolidated financial instruments:

Schedule of consolidated financial instruments
	Level in	June 30, 2022				December 31, 2021				Level in	September 30, 2022				December 31, 2021
	Fair Value	Carrying		Fair		Carrying		Fair		Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy	Amount		Value		Amount		Value		Hierarchy	Amount		Value		Amount		Value
Assets:
Cash and cash equivalents	1	$	7,185,628	$	7,185,628	$	7,688,743	$	7,688,743	1	$	4,452,562	$	4,452,562	$	7,688,743	$	7,688,743
Restricted cash	1		541,883		541,883		541,883		541,883	1		1,140,483		1,140,483		541,883		541,883

Liabilities:
Convertible notes payable	3	$	2,900,000	$	2,755,000	$	2,900,000	$	2,900,000	3	$	2,400,000	$	2,168,000	$	2,900,000	$	2,900,000
Convertible notes payable at fair value	3		466,255		466,255		998,135		998,135
Convertible note payable at fair value										3		420,613		420,613		998,135		998,135
Warrant liability	3		40,000		40,000		135,000		135,000	3		30,000		30,000		135,000		135,000
Contingent consideration	3		710,000		710,000		4,284,221		4,284,221	3		705,000		705,000		4,284,221		4,284,221

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

As of ~~June~~September 30, 2022, the Company has ~~three~~two outstanding convertible notes payable with aggregate principal amount of ~~$2,900,000.~~$2,400,000. See Note 8 for further information on the terms of these convertible notes.

The estimated fair value of the convertible notes was computed using a Monte Carlo Simulation, using the following assumptions:

Fair Value Option (“FVO”) Election – Convertible ~~notes~~note payable and freestanding warrants

As of ~~June~~September 30, 2022, the Company has one outstanding convertible note payable with a face value of $500,000 (the “March 4th Note”), which is accounted for under the Accounting Standards Codification (“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 ~~(expense)~~ in the accompanying condensed consolidated statements of operations under the caption ~~“change~~“Change in fair value of convertible notes.”

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, 2021 to ~~June~~September 30, 2022:

Schedule of fair value categorized within Level 3
	March 4th Note			March 4th Note
Beginning fair value balance reported on the condensed consolidated balance sheet at December 31, 2021	$	998,135		$	998,135
(Gain) in fair value reported in the condensed consolidated statements of operations		(531,880	)
Ending fair value balance reported on the condensed consolidated balance sheet at June 30, 2022	$	466,255
(Gain) on change of fair value reported in the condensed consolidated statements of operations					(577,522	)
Ending fair value balance reported on the condensed consolidated balance sheet at September 30, 2022				$	420,613

The estimated fair value of the March 4th Note as of ~~June~~September 30, 2022 and December 31, 2021, 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:

Schedule of estimated fair value
	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
Face value principal payable	$	500,000		$	500,000		$	500,000		$	500,000
Original conversion price	$	3.91		$	3.91		$	3.91		$	3.91
Value of Common Stock	$	3.16		$	8.52		$	2.65		$	8.52
Expected term (years)		7.68			8.18			7.43			8.18
Volatility		100	%		100	%		100	%		100	%
Risk free rate		3.03	%		1.47	%		3.95	%		1.47	%

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

In connection with the March 4th Note, the Company issued the Series I Warrants. The Series I Warrants are 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, 2021 to ~~June~~September 30, 2022:

Schedule of fair value categorized within Level 3

Fair Value:	Series I			Series I
Beginning fair value balance reported on the condensed consolidated balance sheet at December 31, 2021	$	135,000		$	135,000
(Gain) in fair value reported in the condensed consolidated statements of operations		(95,000	)
Ending fair value balance reported on the condensed consolidated balance sheet at June 30, 2022	$	40,000
(Gain) on change of fair value reported in the condensed consolidated statements of operations					(105,000	)
Ending fair value balance reported on the condensed consolidated balance sheet at September 30, 2022				$	30,000

The estimated fair value of the Series “I” Warrants was computed using a Black-Scholes valuation model, using the following assumptions:

Schedule of estimated fair value
Fair Value Assumption - Series “I” Warrants	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
Exercise Price per share	$	3.91		$	3.91		$	3.91		$	3.91
Value of Common Stock	$	3.16		$	8.52		$	2.65		$	8.52
Expected term (years)		3.17			3.67			2.92			3.67
Volatility		100	%		100	%		100	%		100	%
Dividend yield		0	%		0	%		0	%		0	%
Risk free rate		2.99	%		1.07	%		4.25	%		1.07	%

The Company records the fair value of the contingent consideration liability in the condensed consolidated balance sheets under the caption “Contingent ~~Consideration”~~consideration” and records changes to the liability against earnings or loss under the caption ~~“Changes~~“Change in fair value of contingent consideration” in the condensed consolidated statements of operations.

As discussed in Note 4, during the year ended December 31, 2021, the B/HI seller met the conditions for payment of contingent consideration. As a result, the contingent consideration has been recorded as the actual amount of the payout to the B/HI seller, $1.1 million, of which $600,000 was paid in cash on June 29, 2022 and the remainder in common stock, which was settled on June 14, 2022 by the issuance of 163,369 shares of Company common stock.

For the contingent consideration related to Be Social, the Company utilized a Monte Carlo Simulation model, which incorporates significant inputs that are not observable in the market, and thus represents a Level 3 measurement as defined in ASC 820. The unobservable inputs utilized for measuring the fair value of the contingent consideration reflect management’s own assumptions about the assumptions that market participants would use in valuing the contingent consideration as of the acquisition date. The Company determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:

Schedule of contingent consideration
	Be Social						Be Social
Inputs	As of June 30, 2022			As of December 31, 2021			As of September 30, 2022			As of December 31, 2021
Risk Free Discount Rate (based on US government treasury obligation with a term similar to that of the contingent consideration)		2.86	%		0.73	%		3.33	%		0.73	%
Annual Asset Volatility Estimate		75.0	%		85.0	%		60.00	%		85.00	%

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

For the contingent consideration, which ~~are~~is measured at fair value categorized within Level 3 of the fair value hierarchy, the following is a reconciliation of the fair values from December 31, 2021 to ~~June~~September 30, 2022:

Schedule of reconciliation of the fair values
	The Door⁽¹⁾			Be Social⁽²⁾		B/HI⁽³⁾			The Door⁽¹⁾			Be Social⁽²⁾			B/HI⁽³⁾
Beginning fair value balance reported on the condensed consolidated balance sheet at December 31, 2021	$	2,381,869		$	710,000	$	1,192,352		$	2,381,869		$	710,000		$	1,192,352
Gain in fair value reported in the condensed consolidated statements of operations		(1,358,672	)		—		(76,106	)
(Gain) on change of fair value reported in the condensed consolidated statements of operations										(1,358,672	)		(5,000	)		(76,106	)
Settlement of contingent consideration		(1,023,197	)		—		(1,116,246	)		(1,023,197	)		—			(1,116,246	)
Ending fair value balance reported in the condensed consolidated balance sheet at June 30, 2022	$	—		$	710,000	$	—
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2022									$	—		$	705,000		$	—

On December 29, 2021, the Company entered into a purchase agreement (the “LP 2021 Purchase Agreement”) and a registration rights agreement (the “LP 2021 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of its shares of common stock from time to time over a 36-month period.

The Company may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common stock on any business day (a “Regular Purchase”), provided that on such day the last closing sale price per-share of our common stock is not less than $1.00 as reported by the Nasdaq Capital Market. The amount of a Regular Purchase may be increased under certain circumstances up to 75,000 shares if the closing price is not below $10.00, and up to 100,000 shares if the closing price is not below $12.50, provided that Lincoln Park’s committed obligation for Regular Purchases on any business day shall not exceed $2,000,000.In the event we purchase the full amount allowed for a Regular Purchase on any given business day, we may also direct Lincoln Park to purchase additional amounts as accelerated and additional accelerated purchases. The purchase price of shares of common stock related to the future funding will be based on the then prevailing market prices of such shares at the time of sales as described in the LP 2021 Purchase Agreement.

Pursuant to the terms of the LP 2021 Purchase Agreement, at the time the Company signed the LP 2021 Purchase Agreement and the LP 2021 Registration Rights Agreement, the Company issued 51,827 shares of common stock to Lincoln Park as consideration for its commitment (“commitment shares”) to purchase shares of our common stock under the LP 2021 Purchase Agreement. In addition, the Company issued an additional 37,019 commitment shares on March 7, 2022. The commitment shares were recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to be raised under the LP 2021 Purchase Agreement.

During the ~~three and six~~nine months ended ~~June~~September 30, 2022, excluding the additional commitment shares disclosed above, the Company sold~~450,000~~ ~~and~~ 1,035,000 shares of common stock, respectively, at prices ranging between $3.47 and $5.15 pursuant to the LP 2021 Purchase Agreement and received proceeds of $~~1,852,290~~ ~~and $~~4,367,640, respectively.

~~Pursuant to the terms of~~ The LP 2021 Purchase Agreement ~~Lincoln Park is currently not obligated to purchase shares of common stock from~~was terminated effective August 12, 2022 and the Company ~~because~~did not sell any shares pursuant to this agreement during the Company no longer has an effective shelf registration statement available to register the shares issuable to Lincoln Park. On August 11, 2022, the Company notified Lincoln Park that it was terminating the LP 2021 Purchase Agreement effective August 12,three months ended September 30, 2022.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

~~Subsequent to June 30, 2022, on~~On August 10, 2022, the Company entered into a new purchase agreement (the “LP 2022 Purchase Agreement”) and a registration rights agreement (the “LP 2022 Registration Rights Agreement”) with Lincoln Park, pursuant to which the Company could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of its shares of common stock from time to time over a 36-month period.

The Company may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common stock on any business day (a “Regular Purchase”). The amount of a Regular Purchase may be increased under certain circumstances up to 75,000 shares if the closing price is not below $7.50 and up to 100,000 shares if the closing price is not below $10.00, provided that Lincoln Park’s committed obligation for Regular Purchases on any business day shall not exceed $2,000,000. In the event we purchase the full amount allowed for a Regular Purchase on any given business day, we may also direct Lincoln Park to purchase additional amounts as accelerated and additional accelerated purchases. The purchase price of shares of common stock related to the future funding will be based on the then prevailing market prices of such shares at the time of sales as described in the LP 2022 Purchase Agreement.

Pursuant to the terms of the LP 2022 Purchase Agreement, at the time the Company signed the LP 2022 Purchase Agreement and the LP 2022 Registration Rights Agreement, the Company issued 57,313 shares of common stock to Lincoln Park as consideration for its commitment (“LP 2022 commitment shares”) to purchase shares of our common stock under the LP 2022 Purchase Agreement. The commitment shares were recorded as a period expense and included within selling, general and administrative expenses in the condensed consolidated statements of operations.

During both the three and nine months ended September 30, 2022, excluding the additional commitment shares disclosed above, the Company sold 245,000 shares of common stock at prices ranging between $2.42 and $3.72 pursuant to the LP 2022 Purchase Agreement and received proceeds of $681,460. Subsequent to September 30, 2022, between October 1, 2022 and November 14, 2022, the Company sold 215,000 shares of common stock at prices ranging between $2.31 and $2.65 pursuant to the LP 2022 Purchase Agreement and received proceeds of $547,375.

The Company evaluated the contract that includes the right to require Lincoln Park to purchase shares of common stock in the future (“put right”) considering the guidance in ASC 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” (“ASC 815-40”) and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting. The Company has analyzed the terms of the freestanding put right and has concluded that it has no value as of September 30, 2022.

On June 29, 2017, the shareholders of the Company approved the Dolphin Digital Media, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). There are 2,000,000 shares available to grant under the 2017 Plan. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company granted Restricted Stock Units (“RSUs”) to certain employees under the 2017 Plan, as detailed in the table below. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company did not issue any awards under the 2017 Plan.

The RSUs granted under the 2017 Plan to the Company’s employees vest in four equal installments on the following dates: March 15, 2022, June 15, 2022, September 15, 2022 and December 15, 2022. The Company recognized compensation expense for RSUs of $~~54,757~~52,520 and $~~114,062~~166,582 for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, which is included in payroll and benefits in the condensed consolidated statements of operations. There was 0no share-based compensation recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2021. As of ~~June~~September 30, 2022, unrecognized compensation expense related to RSUs of $~~109,252~~51,965 is expected to be recognized over a weighted-average period of ~~0.46~~0.21 years.

Schedule of RSUs
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Outstanding (nonvested), December 31, 2021	—		$	—		—		$	—
Granted	36,336			6.86		36,336			6.86
Forfeited	(3,726	)		6.86		(4,404	)		6.86
Vested	(16,684	)		6.86		(24,357	)		6.86
Outstanding (nonvested), June 30, 2022	15,926		$	6.86
Outstanding (nonvested), September 30, 2022						7,575		$	6.86

Pursuant to the employment agreement between the Company and Mr. Anthony Francisco, on July 27, 2022, the Company issued to Mr. Francisco 11,521 shares of Common Stock at a price of $4.34 per share, the closing sale price for the Common Stock on the date the shares were issued. Mr. Francisco’s employment agreement also entitles him to receive share awards amounting to $25,000 at each of certain dates in 2023 and 2024, in the aggregate amounting to $100,000.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED Consolidated FINANCIAL Statements

(Unaudited)

The following table sets forth the computation of basic and diluted (loss) earnings ~~(loss)~~ per share:

Schedule of Basic and Diluted Income (Loss) Per Share
	Three months ended June 30,						Six months ended June 30,						Three months ended September 30,					Nine months ended September 30,
	2022			2021			2022			2021			2022			2021		2022			2021
Numerator
Net income (loss)	$	612,008		$	1,349,942		$	(180,473	)	$	(3,922,043	)
Net (loss) income													$	(1,311,719	)	$	141,651	$	(1,492,191	)	$	(3,780,392	)
Net income attributable to participating securities		12,490			8,750			—			—			—			5,833		—			—
Net income (loss) attributable to Dolphin Entertainment common stock shareholders and numerator for basic earnings (loss) per share		599,518			1,341,192			(180,473	)		(3,922,043	)
Undistributed earnings for the three months ended June 30, 2022 attributable to participating securities		12,490			—			—			—
Net (loss) income attributable to Dolphin Entertainment common stock shareholders and numerator for basic (loss) earnings per share														(1,311,719	)		135,818		(1,492,191	)		(3,780,392	)
Change in fair value of convertible notes payable		(244,022	)		(268,974	)		(531,880	)		—			(45,642	)		—		(577,522	)		—
Change in fair value of warrants		—			(65,000	)		(95,000	)		—			(10,000	)		—		(105,000	)		—
Interest expense		9,863			36,862			19,726			—			9,863			—		29,589			—
Numerator for diluted earnings (loss) per share	$	377,849		$	1,044,080		$	(787,627	)	$	(3,922,043	)
Numerator for diluted (loss) earnings per share													$	(1,357,498	)	$	135,818	$	(2,145,124	)	$	(3,780,392	)

Denominator
Denominator for basic EPS - weighted-average shares		9,498,266			7,664,000			9,113,252			7,456,360			9,664,681			7,740,085		9,307,830			7,551,974
Effect of dilutive securities:
Warrants		—			11,913			2,555			—			1,157			—		2,100			—
Convertible notes payable		127,877			237,483			127,877			—			127,877			—		127,877			—
Denominator for diluted EPS - adjusted weighted-average shares		9,626,143			7,913,396			9,243,684			7,456,360			9,793,715			7,740,085		9,437,807			7,551,974

Basic earnings (loss) per share	$	0.06		$	0.17		$	(0.02	)	$	(0.53	)
Diluted earnings (loss) per share	$	0.04		$	0.13		$	(0.09	)	$	(0.53	)
Basic (loss) earnings per share													$	(0.14	)	$	0.02	$	(0.16	)	$	(0.50	)
Diluted (loss) earnings per share													$	(0.14	)	$	0.02	$	(0.23	)	$	(0.50	)

Basic (loss) earnings ~~(loss)~~ 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.

~~DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~JUNE 30, 2022~~

One of the Company’s convertible notes payable, the warrants 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 ~~June 30, 2022 and June~~September 30, 2021, the Company attributed $~~12,490~~5,833 ~~and $8,750, respectively,~~ of the Company’s net income to these participating securities and reduced the net income available to common shareholders by that amount when calculating basic earnings per share. For the ~~six~~three months ended ~~June~~September 30, 2022 and the nine months ended September 30, 2022 and 2021, the Company had a net loss and as such the two-class method is not presented.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, the convertible promissory ~~notes, except for~~note carried at fair value and the outstanding warrants were included in the calculation of fully diluted loss per share. The other convertible notes carried at ~~fair value, were not included in diluted income (loss) per share because inclusion was considered to be anti-dilutive. For~~their principal loan amount, convertible into an aggregate of 578,313 and 663,801 weighted average shares for the ~~six~~three and nine months ended ~~June~~September 30, 2022 ~~the warrants were included in diluted loss per share but~~respectively, were not included in the calculation of diluted ~~income~~loss per share ~~for the three months ended June 30, 2022 because the warrants were not “in the money”.~~

as their effect would be antidilutive. For the three months ended ~~June~~September 30, 2021, convertible promissory notes ~~and warrants~~in the aggregate of 326,702 weighted average shares were not included in the calculation of diluted earnings per share ~~using the if-converted method that assumes the convertible promissory notes are converted at the beginning of the reporting period using the average market price~~and for the ~~three~~nine months ended ~~June~~September 30, 2021, ~~of the Common Stock. For the six months ended June 30, 2021, the~~ convertible promissory notes and warrants in the aggregate ~~amount~~ of ~~304,613~~273,594 weighted average shares ~~of Common Stock, respectively,~~ were not included in the calculation of diluted loss per share because inclusion was considered to be anti-dilutive.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED Consolidated FINANCIAL Statements

(Unaudited)

As part of the employment agreement with its CEO, the Company provided a $1,000,000 signing bonus in 2012, which has not been paid and is recorded in accrued compensation on the condensed consolidated balance sheets, along with unpaid base salary of $1,625,000 in aggregate attributable for the period from 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 10% per annum from the date of his employment agreement until it is paid. Even though the employment agreement expired and has not been renewed, the Company has an obligation under the agreement to continue to accrue interest on the unpaid balance.

As of ~~June~~September 30, 2022 and December 31, 2021, the Company had accrued $2,625,000 of compensation as accrued compensation and has balances of $~~1,445,764~~1,511,929 and $1,565,588, 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 $~~65,445~~66,164 for both the three months ended ~~June~~September 30, 2022 and 2021, and $~~130,171~~196,336 for both the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. On June 15, 2022, the Company paid $250,000 to its CEO for interest owed on the accrued compensation.

The Company entered into the DE LLC Note with an entity wholly owned by our CEO. See Note 9 for further discussion.

The Company operates in two reportable segments, Entertainment Publicity and Marketing Segment (“EPM”) and Content Production Segment (“CPD”).

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

The profitability measure employed by our chief operating decision maker, our President and Chief Executive Officer, for allocating resources to operating segments and assessing operating segment performance is operating income (loss). Salaries and related expenses include salaries, bonuses, commissions and other incentive related expenses. General and administrative expenses include rental expense and depreciation of property, equipment and leasehold improvements for properties occupied by corporate office employees, as well as legal and professional expenses which primarily include professional fees related to financial statement audits, legal, investor relations and other consulting services, which are engaged and managed by each of the segments. All segments follow the same accounting policies as those described in the Annual Report on Form 10-K for the year ended December 31, 2021.

In connection with the acquisitions of 42West, The Door, Viewpoint, Shore Fire, Be Social, and B/HI, the Company assigned $~~5,458,401~~5,116,568 of intangible assets, net of accumulated amortization of $~~8,011,599~~8,353,432, and goodwill of $20,021,357 as of ~~June~~September 30, 2022 to the EPM segment. Equity method investments are included within the ~~CPD~~EPM segment.

Schedule of Revenue and Assets by Segment
	Three months ended June 30,						Six months ended June 30,						Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Revenues:
EPM	$	10,290,626		$	8,643,244		$	19,467,735		$	15,820,361		$	9,899,013		$	9,399,432		$	29,366,748		$	25,219,793
CPD		—			—			—			—			—			—			—			—
Total	$	10,290,626		$	8,643,244		$	19,467,735		$	15,820,361		$	9,899,013		$	9,399,432		$	29,366,748		$	25,219,793

Segment Operating Income (Loss):
EPM	$	2,217,043		$	1,556,171		$	2,731,850		$	402,295		$	604,837		$	507,658		$	3,336,688		$	488,077
CPD		(1,728,085	)		(1,334,878	)		(3,206,618	)		(1,740,942	)		(1,738,604	)		(1,579,369	)		(4,945,222	)		(2,921,342	)
Total operating income (loss)		488,958			221,293			(474,768	)		(1,338,647	)
Total operating (loss) income														(1,133,767	)		(1,071,711	)		(1,608,534	)		(2,433,265	)
Interest expense		(125,348	)		(169,837	)		(274,737	)		(335,031	)		(126,147	)		(241,115	)		(400,884	)		(576,146	)
Other income (expenses), net		279,022			1,298,486			626,880			(2,287,216	)		55,642			1,454,477			682,522			(809,832	)
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	$	642,632		$	1,349,942		$	(122,625	)	$	(3,960,894	)
(Loss) income before income taxes and equity in losses of unconsolidated affiliates													$	(1,204,272	)	$	141,651		$	(1,326,896	)	$	(3,819,243	)

	As of June 30, 2022		As of December 31, 2021		As of September 30, 2022		As of December 31, 2021

Total assets:
EPM	$	49,395,251	$	48,691,939	$	48,366,935	$	48,691,939
CPD		3,141,404		4,099,512		7,358,533		4,099,512
Total	$	52,536,655	$	52,791,451	$	55,725,468	$	52,791,451

The Company and its subsidiaries are party to various office leases with terms expiring at different dates through December ~~2026.~~2027. The amortizable life of the right-of-use (“ROU”) asset is limited by the expected lease term. Although certain leases include options to extend, the Company did not include these in the ROU asset or lease liability calculations because it is not reasonably certain that the options will be executed.

On July 18, 2022, the Company entered into an agreement to sublet 17,554 rentable square feet in Los Angeles, California at a base rent of $3.61 per rentable square foot. The term of the sublease commenced on July 27, 2022 and expires on November 29, 2027 and allows for annual increases of 3% per annum throughout the term of the lease.

The table below shows the lease income and expenses recorded in the condensed consolidated statements of operations incurred during the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

Schedule of Lease Income and Expenses
			Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
Lease costs	Classification	2022			2021		2022			2021		Classification	2022			2021		2022			2021
Operating lease costs	Selling, general and administrative expenses	$	590,072		$	664,315	$	1,166,611		$	1,410,843	Selling, general and administrative expenses	$	709,542		$	620,121	$	1,876,153		$	2,029,524
Operating lease costs	Direct costs		—			—		—			60,861	Direct costs		—			—		—			60,861
Sublease income	Selling, general and administrative expenses		(76,568	)		—		(121,983	)		—	Selling, general and administrative expenses		(106,247	)		—		(228,230	)		—
Net lease costs		$	513,504		$	664,315	$	1,044,628		$	1,471,704		$	603,295		$	620,121	$	1,647,923		$	2,090,385

During the ~~three and six~~nine months ended ~~June~~September 30, 2022, the Company recorded an impairment of its ROU asset amounting to $98,857, related to the sublease of one of the Company’s subsidiaries’ offices, which was included in selling, general and administrative expenses in the condensed consolidated statements of operations.

DOLPHIN ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~ CONDENSED ~~CONSOLIDATED~~Consolidated FINANCIAL ~~STATEMENTS~~Statements

~~JUNE 30, 2022~~(Unaudited)

For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company made payments in cash related to its operating leases in the amounts of $~~1,063,972~~1,567,453 and $~~1,402,896~~2,067,546, respectively.

Future maturities lease payments for operating leases for the remainder of 2022 and thereafter, were as follows:

Schedule of Future Minimum Payments Under Operating Lease Agreements
2022	$	1,009,668		$	695,949
2023		1,954,903			2,659,521
2024		1,824,908			2,550,664
2025		1,232,060			1,979,589
2026		940,982			1,782,057
Thereafter		—			719,797
Total lease payments	$	6,962,521		$	10,387,577
Less: Imputed interest		(1,042,661	)		(1,772,284	)
Present value of lease liabilities	$	5,919,860		$	8,615,293

As of ~~June~~September 30, 2022, the Company’s weighted average remaining lease term on its operating leases is ~~3.28~~3.60 years and the Company’s weighted average discount rate is ~~7.64~~8.63% related to its operating leases.

On July 18, 2022, the Company entered into an agreement to sublet 17,554 rentable square feet in Los Angeles, California at a base rent of $3.61 per rentable square foot. The term of the sublease commences on July 27, 2022 and expires on November 29, 2027 and allows for annual increases of 3% per annum throughout the term of the lease.

On June 24, 2022, the Company entered into an agreement with IMAX Corporation (“IMAX”) to co-produce and co-finance a documentary motion picture on the flight demonstration squadron of the United States Navy, called The Blue Angels (“Blue Angels Agreement”). IMAX and Dolphin have each agreed to fund 50% of the production budget. ~~On June 29,~~During the three and nine months ended September 30, 2022, the Company ~~made a payment in the amount of~~paid $~~500,000~~1,000,000 and $1,500,000, respectively, pursuant to the Blue Angels Agreement, which ~~was~~were recorded as a capitalized production costs.

We have evaluated the Blue Angels Agreement and have determined that it is a collaborative arrangement under FASB ASC Topic 808 “Collaborative Arrangements”. We will reevaluate whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards, dependent upon the ultimate commercial success of documentary motion picture.

As production of the documentary motion picture is still in the early stages, no income or expense has been recorded in connection with the Blue Angels Agreement during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

The Company may be subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. The Company is not aware of any pending litigation as of the date of this report and, therefore, 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.

As discussed in Note 17, on June 24, 2022, the Company entered into the Blue Angels Agreement with IMAX. Under the terms of this agreement, the Company has funded ~~an initial~~ $~~500,000~~1,500,000 and has committed to fund up to an additional $~~1,500,000~~500,000 of the production budget, which is expected to be disbursed in the first quarter of 2023.

On October 2, 2022, the Company minted and offered for sale a collection of 7,777 non-fungible tokens (“NFT”s), titled Creature Chronicles: Exiled Aliens. The collection generated approximately 13,175 Solana (“SOL”) equivalent to approximately $435,000 on the date of the sale.

On November 14, 2022, (the “Closing Date”), the Company, through its wholly owned subsidiary, MidCo LLC, (“MidCo”), acquired all of the issued and outstanding membership interest of Socialyte, LLC, a Delaware limited liability company, (“Socialyte”), pursuant to a membership purchase agreement between the ~~remainder~~Company and NSL Ventures, LLC (“Seller”). Socialyte is a New York and Los Angeles based creative agency specializing in social media influencer marketing campaigns for brands.

The consideration paid by the Company in connection with the acquisition of ~~2022~~Socialyte is $13,000,000 plus the potential to earn up to an additional $5,000,000 upon meeting certain financial targets in 2022. On the Closing Date, the Company paid the Seller $5,000,000 cash, issued the Seller 1,346,257 shares of its Common Stock and issued the Seller a $3,000,000 unsecured promissory note, which is to be repaid in two equal installments on June 30, 2023 and September 30, 2023.

In addition, the Company issued the Seller 685,234 shares of its Common Stock in satisfaction of the Closing Date working capital adjustment. The Company partially financed the cash portion of the consideration with a $3,000,000 five-year secured loan from Bank Prov with MidCo and Socialyte as co-borrowers, which the Company guaranteed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a leading independent entertainment marketing and premium content production company. Through our subsidiaries, 42West, The Door, Shore Fire, Viewpoint and Be Social, ~~and B/HI,~~ we provide expert strategic marketing and publicity services to many of the top brands, both individual and corporate, in the entertainment, hospitality and music industries. 42West, The Door and Shore Fire are each recognized global leaders in the PR services for the industries they serve. Viewpoint adds full-service creative branding and production capabilities and Be Social provides ~~influencer marketing~~influencer-marketing capabilities through its roster of highly engaged social media influencers. 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. Our common stock trades on The Nasdaq Capital Market under the symbol “DLPN.”

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, such as live event production, can create synergistic opportunities and bolster profits and cash flow. We have identified potential acquisition targets and are in various stages of discussion with such targets.

We have also established an investment strategy, “Dolphin 2.0,” based upon identifying opportunities to develop internally owned assets, or to acquire ownership interest 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 Dolphin 2.0. We intend to enter into additional investments during 2022 and 2023, but there is no assurance that we will be successful in doing so, whether in 2022, 2023 or at all.

We operate in two reportable segments: our entertainment publicity and marketing segment and our content production segment. The entertainment publicity and marketing segment comprises 42West, The Door, Shore Fire, Viewpoint and Be Social ~~and B/HI~~ and provides clients with diversified services, including public relations, entertainment content marketing, strategic marketing consulting, digital marketing capabilities, creative branding and in-house production of content for marketing. The content production segment comprises Dolphin Films and Dolphin Entertainment and specializes in the production and distribution of digital content and feature films. The activities of our Content Production segment also include all corporate overhead activities.

We believe our ability to engage a broad consumer base through our best-in-class pop culture marketing assets provides us an opportunity to make investments in products or companies which would benefit from our collective marketing power. We call these investments “Dolphin 2.0” (with “Dolphin 1.0” being the underlying businesses of each of our subsidiaries mentioned above). Simply put, we seek to own an interest in some of the assets we are marketing. Specifically, we want to own an interest in assets where our experience, industry relationships and marketing power will most influence the likelihood of success. This leads us to seek investments in the following categories of assets: 1) Content; 2) Live Events; and 3) Consumer Products.

The first of our Dolphin 2.0 investments has been in the new world of Non-Fungible Tokens (“NFTs”). We see a large opportunity in this sector. Even without broad consumer adoption, the NFT market grew from an estimated $250 million in 2020 to over $40 billion in 2021, according to Bloomberg. We believe the NFT market will continue to grow for years to come, driven by the combination of 1) the ability of consumers to purchase using a credit card (and not just with cryptocurrencies); 2) consumer-friendly pricing options (previously not readily available due to large “gas fees” charged by both sellers and buyers of NFTs to offset the energy consumption required to “mint” the NFT for sale); and 3) popular entertainment and pop culture collectibles being offered.

~~In March, 2021,~~On October 2, 2022, we announced our intentions to enter into the production and marketing of NFTs. In August, 2021, we announced our partnership with FTX.US, a leading cryptocurrency exchange, to develop and launch NFT collections across all major entertainment industry verticals (film, television, music, gaming, etc.). In December, 2021, we unveiledminted (offered for sale) our first collection, ~~entitled~~ “Creature Chronicles: Exiled ~~Aliens,”~~Aliens”, a generative art collection of ~~10,000~~7,777 unique ~~avatars. We expect to mint (or offer for sale) “Creature Chronicles” during the third quarter of 2022.~~avatars designed by Anthony Francisco, former Marvel Studio artist. The collection generated approximately 13,175 SOL, equaling approximately $435,000.

Our second Dolphin 2.0 investment was made in October, 2021, when we acquired an ownership interest in Midnight Theatre, a state-of-the-art contemporary variety theater and restaurant in the heart of Manhattan. An anchor of Brookfield Properties’ recently opened $4.5 billion Manhattan West development, the Midnight Theatre ~~is in the final stages of construction, and expects to open in~~opened on September 21, 2022. The restaurant, Hidden Leaf, opened on July 6, 2022.

Our third Dolphin 2.0 investment was made in December, 2021, when we acquired an ownership interest in Crafthouse Cocktails, a pioneering brand of ready-to-drink, all-natural classic cocktails. During the third quarter of 2022, Crafthouse Cocktails began its first international operations, with distribution in London, United Kingdom.

We have also made ~~out~~our first content investment under Dolphin 2.0. See Note 17 above for details regarding our Collaborative Arrangement with IMAX for production and distribution of the documentary feature “The Blue ~~Angels”.~~Angels.”

~~During March 2020, the World Health Organization categorized a novel coronavirus (“COVID-19”) as a pandemic, and it has~~The continued spread ~~throughout the United States. The pandemic has had and continues to~~of new COVID-19 variants did not have a significant ~~effect~~impact on ~~economic conditions~~our business during the quarter ended September 30, 2022. The future course of the pandemic could have adverse effects in the ~~United States, and continues to cause significant uncertainties in the U.S.~~U.S and global ~~economies.~~

~~The extent to which the COVID-19 pandemic affects~~economies and thus negatively impact our business ~~operations~~ and financial results depends, and will continue to depend, on numerous evolving factors that we may not be able to accurately predict. Since the outbreak of COVID-19 began and public and private sector measures to reduce its transmission were implemented, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, the demand for certain of the services the Company offers was adversely affected resulting in decreased revenues and cash flows.results.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we derived all of our revenues from our entertainment publicity and marketing segment. The entertainment publicity and marketing segment generates its revenues from providing public relations services for celebrities, musicians and brands, entertainment and targeted content marketing for film and television series, strategic communications services for corporations, public relations, marketing services and brand strategies for hotels and restaurants and digital marketing through its roster of social media influencers. Refer to discussion under Revenues in the Results of Operations section below for further discussion on the revenues from the content production segment.

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 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 and (viii) content productions of marketing materials on a project contract basis. 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:

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.

In June 2022, we entered into an agreement with IMAX Corporation (“IMAX”) to co-produce and co-finance a documentary motion picture on the flight demonstration squadron of the United States Navy called the Blue Angels. IMAX and Dolphin have each agreed to fund 50% of the production budget. On June 29, 2022 and September 30, 2022, respectively, we made ~~a payment~~payments in the amount of $500,000 and $1,000,000 pursuant to this agreement. We anticipate a final $500,000 payment to be made in Q1 2023.

Our expenses consist primarily of: (1) direct costs; (2) payroll and benefits expenses (3) selling, general and administrative expenses; (4) depreciation and amortization expense; (5) changes in the fair value of contingent consideration and (6) legal and professional fees.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, other income and expenses consisted primarily of: (1) changes in fair value of convertible notes; (2) changes in fair value of warrants; and (3) interest expense. For the three and nine months ended September 30, 2021, other income and expenses consisted primarily of: (1) gain on extinguishment of debt; (2) ~~changes~~change in fair value of convertible ~~notes and derivative liabilities;~~notes; (3) ~~changes~~change in fair value of ~~warrants;~~warrants and (4) ~~changes~~interest expense. For the nine months ended September 30, 2021, other income and expenses also included a change in the fair value of put ~~rights; (5) acquisition costs and (6) interest expense.~~rights.

Three and ~~six~~nine months ended ~~June~~September 30, 2022 as compared to three and ~~six~~nine months ended ~~June~~September 30, 2021

For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 revenues were as follows:

	For the three months ended June 30,				For the six months ended June 30,				For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021
Revenues:
Entertainment publicity and marketing	$	10,290,626	$	8,643,244	$	19,467,735	$	15,820,361	$	9,899,013	$	9,399,432	$	29,366,748	$	25,219,793
Total revenue	$	10,290,626	$	8,643,244	$	19,467,735	$	15,820,361	$	9,899,013	$	9,399,432	$	29,366,748	$	25,219,793

Revenues from entertainment publicity and marketing increased by approximately ~~$1.6~~$0.5 million and ~~$3.6~~$4.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the same periods in the prior year. The increase is primarily driven by increased revenues across most of our subsidiaries, as cross-selling across our subsidiaries has provided additional customers and increased demand for the service our subsidiaries provide.

We did not derive any revenues from the content production segment as we have not produced and distributed any of the projects discussed above and the projects that were produced and distributed in 2013 and 2016 have mostly completed their normal revenue cycles. We expect to begin generating income in our content production segment in the second half of 2023 with the release of the Blue Angels documentary film.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, our expenses were as follows:

	For the three months ended June 30,						For the six months ended June 30,					For the three months ended September 30,					For the nine months ended September 30,
	2022			2021			2022			2021		2022			2021		2022			2021
Expenses:
Direct costs	$	939,389		$	833,511		$	2,022,279		$	1,583,931	$	837,429		$	991,708	$	2,941,044		$	2,578,295
Payroll and benefits		6,983,804			5,622,468			13,930,426			10,892,831		7,030,814			5,875,755		20,947,531			16,770,091
Selling, general and administrative		1,519,835			1,194,704			3,039,605			2,718,658		1,663,288			1,519,812		4,644,264			4,234,309
Acquisition costs													315,800			—		315,800			22,907
Depreciation and amortization		415,547			478,270			832,785			960,982		415,836			475,207		1,248,621			1,436,189
Change in fair value of contingent consideration		(670,878	)		(165,000	)		(1,434,778	)		200,000		(5,000	)		1,110,000		(1,439,778	)		1,310,000
Legal and professional		613,971			457,998			1,552,186			802,606		774,613			498,661		2,317,800			1,301,267
Total expenses	$	9,801,668		$	8,421,951		$	19,942,503		$	17,159,008	$	11,032,780		$	10,471,143	$	30,975,282		$	27,653,058

Direct costs decreased by approximately $0.2 million and increased by approximately ~~$0.1 million and~~ $0.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2021. The increase in direct costs is mainly driven by ~~$0.2 million and $0.7~~$0.9 million of NFT production and marketing costs for the ~~three and six~~nine months ended ~~June~~September 30, 2022, respectively, that were not present in the same ~~periods~~period in ~~2021. The increases in direct costs were~~2021, offset by ~~a $0.1 million and $0.3~~approximately $0.5 million decrease in direct costs ~~for the three and six months ended June 30, 2022, respectively,~~primarily attributable to a decrease in Viewpoint’s revenue as compared to the ~~three and six~~nine months ended ~~June~~September 30, ~~2021,~~2021. The decrease in direct costs of approximately $0.2 million for the three months ended September 30, 2022 is primarily attributable to the decrease in Viewpoint’s revenue, in comparison with the same period in the prior year, as Viewpoint incurs third party costs related to the production of marketing materials, which are included in direct costs.

Payroll and benefits expenses increased by approximately ~~$1.4~~$1.2 million and ~~$3.0~~$4.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2021, primarily due to additional headcount in 2022 to support the growth of our ~~business.~~business and stock compensation issued to our employees under the 2017 Plan.

Selling, general and administrative expenses increased by approximately ~~$0.3~~$0.1 million and $0.4 million for ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2021, mainly due to ~~a small increase in bad debt expense,~~the fair value of the commitment shares issued as consideration for the Lincoln Park agreement and a $98.9 thousand impairment of an ROU asset.

Acquisition costs for the three and nine months ended September 30, 2022 were $0.3 million, related to our acquisition of the membership interest of Socialyte LLC on November 14, 2022. Acquisition costs for the three and nine months ended September 30, 2021 were not significant, as the Company did not have any significant acquisition activity during 2021.

Depreciation and amortization remained consistent for the three and ~~six~~nine months ended ~~June~~September 30, 2022, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2021.

Change in fair value of the contingent consideration was a ~~$0.7 million~~$5.0 thousand gain and $1.4 million gain for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, compared to the change in fair value of the contingent consideration of ~~$0.2~~$1.1 million ~~gain~~loss and a ~~$0.2~~$1.3 million loss for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The main components of the change in fair value of contingent consideration were the following:

Legal and professional fees increased by approximately ~~$0.2~~$0.3 million and ~~$0.7~~$1.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2021 due primarily ~~to including~~to: (1) entering into the 2022 Lincoln Park agreement and related filing of the Registration Statement on Form S-1 during the third quarter of 2022 and (2) legal, consulting and audit fees related to our restatement of the September 30, 2021 Form 10-Q, revisions of the Forms 10-Q for March 31, 2021 and June 30, 2021 included in our Form 10-K filed on May 26, 2022 and fees associated with our change of auditors.

	For the three months ended June 30,						For the six months ended June 30,						For the three months ended September 30,						For the nine months ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Other Income and expenses:
Gain on extinguishment of debt, net	$	—		$	1,012,973		$	—		$	955,610		$	—		$	1,733,400		$	—		$	2,689,010
Loss on disposal of fixed assets		—			(48,461	)		—			(48,461	)		—			—			—			(48,461	)
Change in fair value of convertible notes		244,022			268,974			531,880			(602,475	)
Change in fair value of convertible note														45,642			(223,923	)		577,522			(826,398	)
Change in fair value of warrants		35,000			65,000			95,000			(2,497,877	)		10,000			(55,000	)		105,000			(2,552,877	)
Change in fair value of put rights		—			—			—			(71,106	)		—			—			—			(71,106	)
Acquisition costs		—			—			—			(22,907	)
Interest expense		(125,348	)		(169,837	)		(274,737	)		(335,031	)		(126,147	)		(241,115	)		(400,884	)		(576,146	)
Total other income (expenses), net	$	153,674		$	1,128,649		$	352,143		$	(2,622,247	)
Total other (expenses) income, net													$	(70,505	)	$	1,213,362		$	281,638		$	(1,385,978	)

We did not record any gain or loss on extinguishment of debt for the three and ~~six~~nine months ended ~~June~~September 30, 2022. During the three and ~~six~~nine months ended ~~June~~September 30, 2021, we recorded a gain on extinguishment of debt of approximately ~~$1.1~~$1.8 million and $2.7 million, respectively, in connection with forgiveness of the PPP Loans of 42West, Dolphin, Viewpoint, Shore Fire and The ~~Door~~Door. Both periods were offset by a loss on extinguishment of debt of $57,400 related to the exchange of certain put rights for shares of our common stock.

We elected the fair value option for ~~certain~~one convertible ~~notes~~note issued in 2020. The fair value of ~~these~~this convertible ~~notes~~note is remeasured at every balance sheet date and any changes are recorded on our condensed consolidated statements of operations. For the three months ended ~~June~~September 30, 2022 and 2021, we recorded a change in the fair value of the convertible ~~notes~~note issued in 2020 in the amount of ~~gains of~~a $45,642, gain and $0.2 million ~~and $0.3 million,~~loss, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we recorded a change in the fair value of the convertible ~~notes~~note issued in 2020 in the amount of a gain of ~~$0.5~~$0.6 million and a loss of ~~$0.6~~$0.8 million, respectively. None of the decrease in the value of the convertible ~~notes~~note was attributable to instrument specific credit risk and as such, all of the gain in the change in fair value was recorded within net (loss) income.

Warrants issued with the convertible ~~notes~~note payable issued in 2020, were initially measured at fair value at the time of issuance and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date, with changes in estimated fair value of each respective warrant liability recognized as other income or expense. In March 2021, one of the warrant holders exercised 146,027 warrants via a cashless exercise formula. The price of our common stock on the exercise date was $19.16 per share and we recorded a change in fair value of the exercised warrants of $2.5 million on our condensed consolidated ~~statement~~statements of operations. The fair value of the 2020 warrants that were not exercised decreased by approximately ~~$35.0~~$10.0 thousand and ~~$95.0 thousand;~~$0.1 million; therefore, we recorded a change in the fair value of the warrants for the three and ~~six~~nine months ended ~~June~~September 30, 2022 for those amounts, respectively, on our condensed consolidated ~~statement~~statements of operations.

The fair value of put rights related to the 42West acquisition were recorded on our condensed consolidated balance sheet on the date of the acquisition. The fair value of the put rights are measured at every balance sheet date and any changes are recorded on our condensed consolidated statements of operations. The fair value of the put rights decreased by approximately $71,000 for the ~~six~~nine months ended ~~June~~September 30, 2021. The final put rights were settled in March of ~~2021 and~~2021; therefore we did not have a liability related to the put rights as of ~~June~~September 30, 2022 and no changes in fair value occurred in 2022.

Interest expense decreased by ~~$44.5 thousand~~$0.1 million and ~~$60.3 thousand~~$0.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the same periods in the prior year, primarily due to lower convertibles and nonconvertible notes outstanding during ~~the six months ended June 30,~~ 2022, as compared to the same periods in the prior year.

Equity in earnings or losses of unconsolidated affiliates includes our share of income or losses from equity investees.

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, we recorded losses of ~~$23,400~~$39,437 and ~~$43,400,~~$82,837, respectively, from our equity investment in Crafthouse Cocktails. The Crafthouse Cocktails investment was not present in the three and ~~six~~nine months ended ~~June~~September 30, 2021.

Midnight Theatre commenced operations at the end of the second quarter of 2022; ~~therefore no~~we recorded a loss of $60,786 thousand for the three months ended September 30, 2022. No equity gains or losses ~~had~~have been recorded ~~during~~prior to the ~~three or six months ended June 30,~~third quarter of 2022.

We recorded an income tax expense of ~~$7.2 thousand~~$7,224 and ~~$14.4 thousand~~$21,672 for the three and ~~six~~nine months ending ~~June~~September 30, 2022, 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”).

We recorded an income tax benefit of ~~$38.9 thousand~~$38,851 for the ~~six~~nine months ended ~~June~~September 30, 2021, due to a reduction of the valuation allowance, as the net deferred tax asset was reduced as a result of the deferred tax liability recorded in the B/HI acquisition. There was no income tax expense or benefit for the three months ended ~~June~~September 30, 2021.

Net ~~income~~loss was approximately ~~$0.6~~$1.3 million or ~~$0.06~~$0.14 per share based on ~~9,498,266~~9,664,681 weighted average shares outstanding for basic loss per share and ~~$0.04~~$0.14 per share based on ~~9,626,143~~9,793,715 weighted average shares on a fully diluted basis earnings per share for the three months ended ~~June~~September 30, 2022. Net income was approximately ~~$1.3~~$0.1 million or ~~$0.17~~$0.02 per share based on ~~7,664,000~~7,740,085 weighted average shares outstanding for both basic ~~earnings per share~~ and ~~$0.13 per share based on 7,913,396 weighted average shares outstanding for fully~~ diluted earnings per share ~~respectively,~~ for the three months ended ~~June~~September 30, 2021. The change in net income for the three months ended ~~June~~September 30, 2022 as compared to the three months ended ~~June~~September 30, 2021, is related to the factors discussed above.

Net loss was approximately ~~$0.2~~$1.5 million or ~~$(0.02)~~$0.16 per share based on ~~9,113,252~~9,307,830 weighted average shares outstanding for basic loss per share and ~~$(0.09)~~$0.23 per share based on ~~9,890,621~~9,437,807 weighted average shares on a fully diluted basis earnings per share for the ~~six~~nine months ended ~~June~~September 30, 2022. Net loss was approximately ~~$3.9~~$3.8 million or ~~$0.53~~$0.50 per share based on ~~7,456,360~~7,551,974 weighted average shares outstanding for both basic and diluted loss per share for the ~~six~~nine months ended ~~June~~September 30, 2021. The change in net loss for the ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the ~~six~~nine months ended ~~June~~September 30, 2021, is related to the factors discussed above.

	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Statement of Cash Flows Data:
Net cash (used in) provided by operating activities	$	(1,719,551	)	$	30,060		$	(3,634,388	)	$	519,960
Net cash used in investing activities		(2,298,702	)		(525,856	)		(3,172,544	)		(525,856	)
Net cash provided by financing activities		3,515,138			1,788,002			4,169,351			4,563,305
Net (decrease) increase in cash and cash equivalents and restricted cash		(503,115	)		1,292,206			(2,637,581	)		4,557,409

Cash and cash equivalents and restricted cash, beginning of period		8,230,626			8,637,376			8,230,626			8,637,376
Cash and cash equivalents and restricted cash, end of period	$	7,727,511		$	9,929,582		$	5,593,045		$	13,194,785

Cash used in operating activities was ~~$1.7~~$3.6 million for ~~six~~nine months ended ~~June~~September 30, 2022, a change of ~~$1.7~~$4.1 million from cash provided by operating activities of ~~$30.1 thousand~~$0.5 million for ~~six~~nine months ended ~~June~~September 30, 2021. The change in cash flows from operations was primarily as a result of:

Cash flows used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$2.3~~$3.2 million related primarily to the issuance of notes receivable. Cash flows used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2021 were $0.5 million entirely related to the acquisition of B/HI, net of cash acquired.

Cash flows provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$3.5~~$4.2 million which mainly related to:

Cash flows provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2021 were ~~$1.8~~$4.6 million, which mainly related to:

As described below in further detail, we have taken measures to position the Company with a stronger balance sheet position, extending current loans to longer term maturities and reducing our overall debt position. Total debt amounted to ~~$5.4~~$4.8 million as of ~~June~~September 30, 2022 compared to $6.2 million as of December 31, 2021, a reduction of ~~$0.8~~$1.4 million or ~~12.7%~~22.0%.

Our debt obligations in the next twelve months from ~~June~~September 30, 2022 increased slightly from the obligations as of December 31, 2021. The current portion of the long-term debt increased to $0.5 million from $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, are sufficient to meet our debt requirements.

On December 29, 2021, ~~the Company~~we entered into a purchase agreement (the “LP 2021 Purchase Agreement”) and a registration rights agreement (the “LP 2021 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which we could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of our shares of common stock from time to time over a 36-month period.

Pursuant to the ~~Company~~terms of the LP 2021 Purchase Agreement, at the time we signed the LP 2021 Purchase Agreement and the LP 2021 Registration Rights Agreement, we issued 51,827 shares of common stock to Lincoln Park as consideration for its commitment (“commitment shares”) to purchase shares of our common stock under the LP 2021 Purchase Agreement. In addition, we issued an additional 37,019 commitment shares on March 7, 2022.

During the nine months ended September 30, 2022, excluding the additional commitment shares disclosed above, we sold 1,035,000 shares of common stock, respectively, at prices ranging between $3.47 and $5.15 pursuant to the LP 2021 Purchase Agreement and received proceeds of $4,367,640, respectively.

In connection with entering into the 2022 LP Purchase Agreement, the prior LP 2021 Purchase Agreement, dated as of December 29, 2021 by and between us and Lincoln Park was terminated effective as of August 10, 2022 and no shares were sold during the three months ended September 30, 2022 pursuant to the LP 2021 Purchase Agreement.

On August 10, 2022, we entered into a new purchase agreement (the “LP 2022 Purchase Agreement”) and a registration rights agreement (the “LP 2022 Registration Rights Agreement”) with Lincoln Park, pursuant to which we could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of its shares of common stock from time to time over a 36-month period.

~~The Company~~We may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common stock on any business day (a “Regular Purchase”), ~~provided that on such day the last closing sale price per-share of our common stock is not less than $1.00 as reported by the Nasdaq Capital Market.~~. The amount of a Regular Purchase may be increased under certain circumstances up to 75,000 shares if the closing price is not below ~~$10.00,~~$7.50, and up to 100,000 shares if the closing price is not below ~~$12.50,~~$10.00, provided that Lincoln Park’s committed obligation for Regular Purchases on any business day shall not exceed $2,000,000. In the event we purchase the full amount allowed for a Regular Purchase on any given business day, we may also direct Lincoln Park to purchase additional amounts as accelerated and additional accelerated purchases. The purchase price of shares of common stock related to the future funding will be based on the then prevailing market prices of such shares at the time of sales as described in the LP ~~2021~~2022 Purchase Agreement.

Pursuant to the terms of the LP ~~2021~~2022 Purchase Agreement, at the time ~~the Company~~we signed the LP ~~2021~~2022 Purchase Agreement and the LP ~~2021~~2022 Registration Rights Agreement, ~~the Company~~we issued ~~51,827~~57,313 shares of common stock to Lincoln Park as consideration for its commitment (“LP 2022 commitment shares”) to purchase shares of our common stock under the LP ~~2021~~2022 Purchase Agreement. ~~In addition, the Company issued an additional 37,019 commitment shares on March 7, 2022.~~ The commitment shares were recorded as ~~an addition to equity for~~a period expense and included within selling, general and administrative expenses in the ~~issuance~~condensed consolidated statements of ~~the common stock and treated as a reduction to equity as a cost of capital to be raised under the LP 2021 Purchase Agreement.~~

During both the three and ~~six~~nine months ended ~~June~~September 30, 2022, excluding the additional commitment shares disclosed above, ~~the Company~~we sold ~~450,000 and 1,035,000~~245,000 shares of common stock ~~respectively,~~ at prices ranging between ~~$3.47~~$2.42 and ~~$5.15~~$3.72 pursuant to the LP ~~2021~~2022 Purchase Agreement and received proceeds of ~~$1,852,290~~$681,460. Between October 1, 2022 and ~~$4,367,640, respectively.~~

~~Pursuant~~November 14, 2022, we sold 215,000 shares of common stock at prices ranging between $2.31 and $2.65 pursuant to the ~~terms of~~ LP ~~2021~~2022 Purchase Agreement and received proceeds of $547,375.

We evaluated the contract that includes the right to require Lincoln Park ~~is currently not obligated~~ to purchase shares of common stock ~~from~~in the ~~Company because~~future (“put right”) considering the ~~Company no longer has~~guidance in ASC 815-40, “Derivatives and Hedging — Contracts on an ~~effective shelf registration statement available to register the shares issuable to Lincoln Park. On August 11, 2022, the Company notified Lincoln Park~~Entity’s Own Equity” (“ASC 815-40”) and concluded that it ~~was terminating~~is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting. We have analyzed the ~~LP 2021 Purchase Agreement effective August 12,~~terms of the freestanding put right and have concluded that it has no value as of September 30, 2022.

Subsequent to June 30, 2022, on August 10, 2022, the Company entered into a new purchase agreement (the “LP 2022 Purchase Agreement”) and a registration rights agreement (the “LP 2022 Registration Rights Agreement”) with Lincoln Park, pursuant to which the Company could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of its shares of common stock from time to time over a 36-month period. See Item 5 – Entry into a Material Definitive Agreement for additional information.

As of ~~June~~September 30, 2022, we had ~~three~~two outstanding convertible promissory notes in the aggregate principal amount of ~~$2.9~~$2.4 million. The convertible promissory notes bear interest at a rate of 10% per annum and mature on the ~~second~~third anniversary of their respective issuances. The balance of each convertible promissory note and any accrued interest may be converted at the noteholder’s option at any time at a purchase price based on a 90-day average closing market price per share of our common stock but not at a price less than $2.50 per share.

As of ~~June~~September 30, 2022, the principal balance of the convertible promissory notes of ~~$2.9~~$2.4 million was recorded in ~~noncurrent~~current liabilities under the caption, ~~convertible promissory notes~~“Convertible Notes Payable” on our condensed consolidated balance sheets.

We recorded interest expense of ~~$67,500~~$80,278 and ~~$135,000~~$215,278 in the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and made cash interest payments amounting to ~~$135,000~~$199,445 during the ~~six~~nine months ended ~~June~~September 30, 2022, related to the convertible notes payable.

During the three and nine months ended September 30, 2022, the holder of one convertible note issued during 2021 converted the principal balance of $500,000 into 125,604 shares of common stock at a conversion price of $3.98 per share. At the moment of conversion, accrued interest related to this note amounted to $5,278 and was paid in cash.

On October 4, 2022, October 18, 2022 and November 3, 2022, we issued three convertible promissory notes in the aggregate amount of $1,300,000. The convertible promissory notes bear interest at 10% per annum, mature on the second anniversary of their issuance and can be converted into shares of common stock, at the noteholder’s option at any time. Two of the convertible notes may not be converted at a price less than $2.50 per share and one of the convertible notes may not be converted at a price less than $2.00 per share.

It is our experience that convertible notes, including their accrued interest, are converted into shares of the Company’s common stock and not settled through payment of cash. Although we are unable to predict the noteholder’s intentions, we do not expect any change from our past experience.

Subsequent to June 30, 2022, on August 8, 2022, the holder of one convertible note issued during 2021 converted the principal balance of $500,000 into 125,604 shares of common stock at a conversion price of $3.98 per share.

We had one convertible promissory note outstanding with aggregate principal amount of $0.5 million as of ~~June~~September 30, 2022 for which we 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 notes with any changes in the fair value recorded in the condensed consolidated statements of operations. As of ~~June~~September 30, 2022, we had a balance of ~~$0.5~~$0.4 million in noncurrent liabilities related to this convertible promissory note measured at fair value.

We recorded interest expense of $9,863 and ~~$19,726~~$29,589 in the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and made cash interest payments amounting to ~~$19,726~~$29,589 during the ~~six~~nine months ended ~~June~~September 30, 2022, related to the convertible ~~notes~~note payable at fair value.

Similar to the Convertible Notes discussed above, our historical experience has been that these convertible notes are converted into shares of the Company’s common stock prior to their maturity date and not settled through payment of cash.

As of ~~June~~September 30, 2022, we have outstanding unsecured nonconvertible promissory notes in the aggregate amount of $0.9 million, which bear interest at a rate of 10% per annum and mature between June and December 2023. For these nonconvertible promissory notes, we had a balance of $0.5 million and $0.4 million recorded as current and noncurrent liabilities, respectively, as of ~~June~~September 30, 2022. On January 15, 2022, its maturity date, a non-convertible promissory note amounting to $0.2 million was repaid in cash.

We recorded interest expense of ~~$23,393~~$22,719 and ~~$48,277~~$70,996 in the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and made cash interest payments amounting to ~~$50,249~~$73,127 during the ~~six~~nine months ended ~~June~~September 30, 2022, related to the nonconvertible promissory notes.

As discussed in Note 17 to our condensed consolidated financial statements, on June 24, 2022, the Company entered into the Blue Angels Agreement with IMAX. Under the terms of this agreement, the Company has funded ~~an initial $500,000~~$1,500,000 and has committed to fund up to an additional ~~$1,500,000~~$500,000 of the production budget, which is expected to be disbursed ~~between~~in the ~~remainder~~first quarter of ~~2022 and~~ 2023.

As of ~~June~~September 30, 2022, we hold convertible notes receivable from JDDC Elemental LLC which operates Midnight Theatre. These convertible notes receivable are recorded at their principal face amount plus accrued interest. Due to their short-term maturity and conversion terms (described below), these have been recorded at the face value of the note and an allowance for credit losses has not been established.

~~The~~As of September 30, 2022, the Midnight Theatre notes amount to ~~$3,238,800~~$4,323,153, including accrued interest receivable of $215,073, and are convertible at the option of the Company into Class A and B Units of Midnight Theatre. ~~In addition, on each of July 11, 2022 and July 21,~~During the three months ended September 30, 2022, Midnight Theatre issued the Company ~~two additional~~nine notes amounting to ~~$341,660~~$869,280 in the aggregate on the same terms as the previous notes.

In addition, during the ~~six~~nine months ended ~~June~~September 30, 2022, we held a convertible note receivable from Stanton South LLC, which operates Crafthouse Cocktails. This note amounted to $500,000 and was mandatorily redeemable by February 1, 2022; on that date the Crafthouse Cocktails note was converted and we were issued Series 2 membership interests of Stanton South LLC. As of ~~June~~September 30, 2022, the Company does not have an outstanding note receivable from Stanton South LLC.

As discussed in Note 19 to our condensed consolidated financial statements, on November 14, 2022, (the “Closing Date”), we acquired all of the issued and outstanding membership interest of Socialyte. The total consideration amounted to $13.0 million plus the potential to earn up to an additional $5.0 million upon meeting certain financial targets in 2022. On the Closing Date, we paid $5.0 million cash, issued the Seller 1,346,257 shares of our Common Stock and issued the Seller a $3.0 million unsecured promissory note, which is to be repaid in two equal installments on June 30, 2023 and September 30, 2023. In addition, we issued the Seller 685,234 shares of our Common Stock in satisfaction of the Closing Date working capital adjustment.

We partially financed the cash portion of the consideration with a secured loan from Bank Prov with MidCo and Socialyte as co-borrowers, which we guaranteed. This loan amounted to $3.0 million, carries a fixed rate of 7.37% and has a five year term.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. As a result of entering into a collaborative arrangement in ~~June~~September 2022, we have updated our revenue recognition accounting policy to include the information as detailed below. There were no other significant changes to our critical accounting policies during the three and ~~six~~nine months ended ~~June~~September 30, 2022, as compared to the critical accounting policies and estimates disclosed in Note 2 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

We analyze our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, we consider whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated ~~statement~~statements of operations.

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.

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, 2021, as updated by our subsequently filed Quarterly Reports on Forms 10-Q and Current Reports on Forms 8-K.

Management’s Report on the Effectiveness of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to improve 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 ~~June~~September 30, 2022. 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, 2021, filed with the SEC on May 26, 2022, which have not been remediated as of the date of the filing of this report.

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:

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~~above.

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.

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. The Company is not aware of any pending litigation as of the date of this report.

There have been no material changes to the risk factors disclosed in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on May 26, 2022.

The following table presents information related to our repurchases of our shares of Common Stock during the quarter ended ~~June~~September 30, 2022:

~~The following information is included in this Item 5 in lieu of filing a Form 8-K:~~

On ~~August 10,~~November 14, 2022 (the “Closing Date”), Dolphin Entertainment, Inc., a Florida corporation (the ~~“Company”~~“Company”), ~~entered into~~through its wholly-owned subsidiary Social MidCo, LLC (“MidCo”), acquired all of the issued and outstanding membership interests of Socialyte, LLC, a Delaware limited liability company (“Socialyte”), pursuant to a membership interest purchase agreement dated the Closing Date (the ~~“2022 LP~~ “Purchase ~~Agreement”~~Agreement”) ~~with Lincoln Park Capital Fund,~~, between the Company and NSL Ventures, LLC (“~~Lincoln Park” or “Investor”~~Seller”) ~~(each,~~. Socialyte is a ~~“Party”,~~NY and ~~together, the “Parties”), which provides that, upon the terms and subject to the conditions and limitations set forth therein,~~Los Angeles-based creative agency specializing in social media influencer marketing campaigns for brands.

The consideration paid by the Company ~~may sell~~in connection with the acquisition of Socialyte is $13,000,000 plus the potential to ~~Lincoln Park~~earn up to ~~$25,000,000~~an additional $5,000,000 upon completion of an earn-out more fully described in the Purchase Agreement. On the Closing Date, the Company paid the Seller $5,000,000 cash, issued the Seller 1,346,257 shares ~~(the “Purchase Shares”)~~ of its ~~common stock, par value $0.015 per share (the “Common Stock”) over~~Common Stock and issued the ~~thirty-six (36) month term~~Seller a $3,000,000 unsecured promissory note, which is be repaid in two equal installments on June 30, 2023 and September 30, 2023. In addition, the Company issued the Seller 685,234 shares of its Common Stock in satisfaction of the ~~2022 LP Purchase Agreement. Concurrently~~Closing Date working capital adjustment. The Company partially financed the cash portion of the consideration with ~~entering into the 2022 LP Purchase Agreement, the~~a $3,000,000 five-year secured loan (the “Term Loan”) from Bank Prov with MidCo and Socialyte as co-borrowers. The Company also entered into a ~~registration rights agreement~~guaranty of the Term Loan.

The foregoing description of the Purchase Agreement is only a summary and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q and incorporated by reference into this Item 1.01.

The Purchase Agreement is filed with ~~Lincoln Park, pursuant to which it agreed~~this Quarterly Report on Form 10-Q to provide ~~Lincoln Park~~security holders with ~~certain registration rights related~~information regarding its terms. It is not intended to provide any other factual information about the Company, Socialyte or any other party to the ~~shares issued under~~Purchase Agreement. The representations, warranties and covenants contained in the ~~2022 LP~~ Purchase Agreement ~~(the “2022 LP Registration Rights Agreement”).~~were made solely for purposes of such agreement and as of specific dates, are solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Security holders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Socialyte or any other party thereto. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures, except to the extent required by law.

OnThe disclosures set forth in Item 1.01 of this above are incorporated by reference into this Item 2.01. The Company intends to file the ~~Commencement Date (as defined below) we issued 57,313~~required financial statements of Socialyte and pro forma financial information in a Current Report on Form 8-K within 71 days of this report.

The information set forth in Item 1.01 of this Quarterly Report on Form 10-Q is incorporated by reference in this Item 3.02. The shares of Common Stock to Lincoln Park as an initial fee for its commitment to purchase shares of our Common Stock under the 2022 LP Purchase Agreement (the “Initial Commitment Shares” and together with the Purchase Shares, the “Shares”). Beginning one business day following the Commencement Date (as defined below) and thereafter, the Company has the right, but not the obligation, on any business day selected by the Company (the “Purchase Date”) to require Lincoln Park to purchase up to 50,000 shares of Common Stock (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”). The Regular Purchase Amount may be increased to up to 75,000 shares if the closing price is not below $7.50, as reported by the Nasdaq Capital Market, and up to 100,000 shares if the closing price is not below $10.00, as reported by the Nasdaq Capital Market. Lincoln Park’s committed obligation under each Regular Purchase shall not exceed $2,000,000, provided that the Parties may mutually agree at any time to increase the Regular Purchase Amount on any Purchase Date at the Purchase Price, above and beyond the foregoing amounts that the Investor is committed to purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to 98.75% of the lesser of: (i) the lowest sale price of the Common Stock during the Purchase Date,issued or (ii) the average of the three (3) lowest closing sale prices of the Common Stock during the ten (10) business days prior to the Purchase Date. The Company shall have the right to submit a Regular Purchase notice to the Investor as often as every business day. A Regular Purchase notice is delivered to the Investor after the market has closed (i.e. after 4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time the Company elects to sell shares to Lincoln Park.

In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln Park on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on the Accelerated Purchase Date (the “Accelerated Purchase”) at a purchase price equal to the lesser of 96% of (i) the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”). The Company shall have the right in its sole discretion to set a minimum price threshold for each Accelerated Purchase in the notice provided with respect to such Accelerated Purchase and the Company may direct multiple Accelerated Purchases in a day provided that delivery of shares has been completed with respect to any prior Regular and Accelerated Purchases that Lincoln Park has purchased.

~~The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares~~ to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the 2022 LP Purchase Agreement, to make additional purchases upon the same terms as an Accelerated Purchase, (an “Additional Accelerated Purchase”).

The purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the 2022 LP Purchase Agreement may in no case exceed 1,936,847 shares (subject to adjustment as described above) of the Common Shares (which is equal to approximately 19.99% of the shares of the Common Shares outstanding immediately prior to the execution of the 2022 LP Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of Common Shares to Lincoln Park under the 2022 LP Purchase Agreement equals or exceeds $4.90 per share (subject to adjustment as described above) (which represents the Minimum Price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the 2022 LP Purchase Agreement, such that the transactions contemplated by the 2022 LP Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules); provided that at no time may Lincoln Park (together with its affiliates) beneficially own more than 9.99% of the Company’s issued ~~and outstanding Common Shares.~~

The 2022 LP Purchase Agreement contains customary representations, warranties, covenants, closing conditions, indemnification and termination provisions. Sales under the 2022 LP Purchase Agreement may commence only after certain conditions have been satisfied (the date on which all requisite conditions have been satisfied, the “Commencement Date”), which conditions include the delivery to Lincoln Park of a prospectus supplement covering the shares of Common Shares issued or sold by the Company to ~~Lincoln Park under~~Seller pursuant to the ~~2022 LP~~ Purchase Agreement have been or will be, as applicable, issued in reliance upon the ~~filing with~~exemption from registration provided by Section 4(a)(2) of the ~~Nasdaq Stock Market~~Securities Act of ~~a Listing~~1933, as amended (the “Securities Act”), and/or Rule 506 of ~~Additional Shares notification with respect~~Regulation D promulgated thereunder. The Seller represented to the Shares and Nasdaq having raised no objection to the consummation of transactions contemplated under the 2022 LP Purchase Agreement, and the receipt by Lincoln Park of a customary opinion of counsel and other certificates and closing documents.

~~The 2022 LP Purchase Agreement may be terminated by the~~ Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the 2022 LP Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Shares. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the 2022 LP Purchase Agreement, the Company did not pay any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other than the issuance of the Commitment Shares.

There are no limitations on the use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Company’s ability to enter into a similar type of agreement during the Term, excluding an At-The-Market transaction with a registered broker-dealer), rights of first refusal, participation rights, penalties or liquidated damages in the 2022 LP Purchase Agreement. The Company may deliver Purchase Notices under the 2022 LP Purchase Agreement, subject to market conditions, and in light of its capital needs, from time to time and under the limitations contained in the 2022 LP Purchase Agreement. Any proceeds that the Company receives under the 2022 LP Purchase Agreement are expected to be used for working capital and general corporate purposes.

~~The Company agrees~~ that it ~~shall file with the SEC within twenty (20) Business Days of the Commencement Date, a new Registration Statement on Form S-1(the “Registration Statement”) covering the resale of Common Stock~~is an “accredited investor” as defined in accordance with the terms of the 2022 LP Registration Rights Agreement, and until the Registration Statement is declared effective, the Company shall not file any other registration statement with the SECRule 501(a) promulgated under the Securities Act.

On November 14, 2022, the Company issued a press release announcing the acquisition of Socialyte. The foregoing is a summary description of certain terms of the 2022 LP Purchase Agreement and the 2022 LP Registration Rights Agreement and, by its nature, is incomplete. Copies of the 2022 LP Purchase Agreement and the 2022 LP Registration Rights Agreement are filed as Exhibits 10.1 and 10.2 attached hereto. The foregoing descriptions of the 2022 LP Purchase Agreement and the 2022 LP Registration Rights Agreement are qualified in their entirety by reference to such exhibits. The 2022 LP Purchase Agreement and 2022 LP Registration Rights Agreement contain customary representations and warranties, covenants and indemnification provisions that the parties made to, and solely for the benefit of, each other in the context of all of the terms and conditions of such agreements and in the context of the specific relationship between the parties thereto. The provisions of the 2022 LP Purchase Agreement and the 2022 LP Registration Rights Agreement, including any representations and warranties contained therein, are not for the benefit of any party other than the parties thereto and are not intended as documents for investors and the public to obtain factual information ~~about the current state of affairs of the parties thereto. Rather, investors and the public should look to other disclosures~~ contained in ~~the Company’s annual, quarterly and current reports it may file~~this Item 7.01 shall not be deemed “filed” with the Securities and Exchange Commission ~~(the “SEC”).~~

The information contained in this Item 5 on this Quarterly Report on Form 10-Q shall not constitute an offer to sell or the solicitation of an offer to buy the shares of the Company’s Common Stock discussed herein, nor ~~shall there be any offer, solicitation or sale of the shares~~incorporated by reference in any ~~jurisdiction in which such offer, solicitation or sale would be unlawful prior to~~ registration ~~or qualification~~statement filed by the Company under the ~~securities laws~~Securities Act of ~~any such jurisdiction.~~

~~In connection with entering into the new 2022 LP Purchase Agreement, the prior Purchase Agreement (the “Agreement”), dated~~1933, as ~~of December 29, 2021 by and between the Company and Lincoln Park was terminated effective as of August 10, 2022.~~amended.

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 ~~August 15,~~November 14, 2022.

Florida	86-0787790
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.015 par value per share	DLPN	The Nasdaq Capital Market

		Page
PART I — FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1

	Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2022 and December 31, 2021 (unaudited)	1
	Condensed Consolidated Statements of Operations for the ~~Three Months Ended March 31,~~three and nine months ended September 30, 2022 and 2021 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the ~~Three Months Ended March 31,~~nine months ended September 30, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the ~~Three Months Ended March 31,~~three and nine months ended September 30, 2022 and 2021 (unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2324

ITEM 4.	CONTROLS AND PROCEDURES	3335

PART II — OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	3537

ITEM 1A.	RISK FACTORS	3537

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3537

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3537

ITEM 4	MINE SAFETY DISCLOSURES	3537

ITEM 5.	OTHER INFORMATION	3537

ITEM 6.	EXHIBITS	3739

SIGNATURES		3840

Schedule of Other liabilities
	June 30,		December 31,
	2022		2021
Accrued funding under Max Steel production agreement	$	620,000	$	620,000
Accrued audit, legal and other professional fees		425,925		429,299
Accrued commissions		458,003		457,269
Accrued bonuses		205,817		360,817
Due to seller of Be Social		—		304,169
Talent liability		2,196,931		2,908,357
Accumulated customer deposits		962,855		1,206,864
Other		461,305		563,809
Other current liabilities	$	5,330,836	$	6,850,584

Schedule of Other liabilities
	September 30,		December 31,
	2022		2021
Accrued funding under Max Steel production agreement	$	620,000	$	620,000
Accrued audit, legal and other professional fees		698,304		429,299
Accrued commissions		496,276		457,269
Accrued bonuses		220,000		360,817
Due to seller of Be Social		—		304,169
Talent liability		2,343,906		2,908,357
Accumulated customer deposits		801,247		1,206,864
Other		512,867		563,809
Other current liabilities	$	5,692,600	$	6,850,584

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Schedule of Future Annual Contractual Principal Payment Commitments of Debt
Debt Type	Maturity Date	2022		2023		2024		2025		2026		Thereafter
Convertible notes payable	Ranging from August to September 2024	$	—	$	—	$	2,400,000	$	—	$	—	$	—
Convertible note payable - fair value option	March 2030		—		—		—		—		—		500,000
Nonconvertible promissory notes	Ranging between June 2023 and December 2023⁽¹⁾		27,935		868,960		—		—		—		—
Loans from related party	July 2024		—		—		1,107,873		—		—		—
		$	27,935	$	868,960	$	3,507,873	$	—	$	—	$	500,000

Schedule of Future Annual Contractual Principal Payment Commitments of Debt
Debt Type	Maturity Date	2022		2023		2024		2025		2026		Thereafter
Convertible notes payable	Ranging from August to September 2023	$	—	$	2,900,000	$	—	$	—	$	—	$	—
Convertible notes payable - fair value option	March 2030		—		—		—		—		—		500,000
Nonconvertible promissory notes	Ranging between June 2023 and December 2023⁽¹⁾		55,182		868,960		—		—		—		—
Loans from related party	July 2023		—		1,107,873		—		—		—		—
		$	—	$	4,932,015	$	—	$	—	$	—	$	500,000

Schedule of convertible notes payable
		June 30, 2022				December 31, 2021
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value

10% convertible notes due in August 2023	3	$	2,000,000	$	1,896,000	$	2,000,000	$	1,998,000
10% convertible notes due in September 2023	3		900,000		859,000		900,000		902,000
		$	2,900,000	$	2,755,000	$	2,900,000	$	2,900,000

Schedule of estimated fair value
Fair Value Assumption – Convertible Debt	June 30, 2022			December 31, 2021
Stock Price	$	3.16		$	8.52
Minimum Conversion Price	$	2.50		$	2.50
Annual Asset Volatility Estimate		100	%		100	%
Risk Free Discount Rate (based on U.S. government treasury obligation with a term similar to that of the convertible note)		2.82% - 2.83	%		0.61% - 0.64	%

(1)	During the year ended December 31, 2021, The Door achieved the conditions for the earnout consideration, which were settled on June 7, 2022 by payment of 279,562 shares of common stock. For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded ~~a gain~~gains of ~~$190,000~~$280,000 and ~~a loss of $180,000,~~$100,000, respectively, in fair value of contingent consideration related to The Door in the condensed consolidated statements of operations.
(2)	For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded losses of ~~$25,000~~$250,000 and ~~$20,000,~~$270,000, respectively, in fair value of contingent consideration related to Be Social in the condensed consolidated statements of operations.
(3)	For both the three and nine months ended September 30, 2021, the Company recorded a loss of $1,140,000 in fair value of contingent consideration related to B/HI in the condensed consolidated statements of operations. During the year ended December 31, 2021, B/HI achieved the conditions for the earnout consideration, which were settled on June 14 and June 29, 2022, as described above.

	(4)	Acquisition costs include professional fees incurred as part of the acquisition of our subsidiaries.

	(5)	Depreciation and amortization ~~include~~– includes the depreciation of our property and equipment and amortization of intangible assets and leasehold improvements.

	·	$~~3.8~~4.1 million decrease in non-cash changes in the fair value of liabilities, such as warrants, convertible notes and put rights;
	·	$~~1.6~~2.7 million decrease in non-cash changes in the fair value of contingent consideration, primarily driven by changes in the price of the Company’s stock;
	·	$~~0.5~~1.5 million payment related to IMAX agreement previously discussed; and
	·	$~~0.9~~1.2 million in changes in other operating assets and liabilities.

	·	$~~3.8~~2.3 million of additional cash generated from our operating results, driven by the further growth of the business;
	·	$~~1.0~~2.7 million of a gain on extinguishment of debt in the ~~six~~nine months ended ~~June~~September 30, 2021 primarily related to the forgiveness of PPP Loans, which was not present in 2022; and
	·	$~~0.3~~3.0 million of non-cash items such as depreciation and amortization, bad debt expense, share-based compensation, impairment of ROU asset, impairment of capitalized production costs and other non-cash losses.

	·	$0.6 million from the cash portion of the contingent consideration payment to B/HI seller; and
	·	$0.3 of repayment of notes payable.

	·	$1.0 million from the exercise of put rights;
	·	$~~0.2~~0.3 million of repayment of the term loan; and
	·	$~~46.8~~71.5 thousand of repayment of notes payable.

Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/2022 – 4/30/2022		—		$	—		—		—
5/1/2022 – 5/31/2022		—			—		—		—
6/1/2022 – 6/30/2022		30			3.29		—		—
Total		30		$	3.29		—		—

Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
7/1/2022 – 7/31/2022		—	$	—		—		—
8/1/2022 – 8/31/2022		—		—		—		—
9/1/2022 – 9/30/2022		17		3.85		—		—
Total		17	$	3.85		—		—

Exhibit No.		Description

3.1**		Amended and Restated Articles of Incorporation of Dolphin Entertainment, Inc., as amended as of September 29, 2022 (incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on September 29, 2022).
10.1*		Membership Interest Purchase ~~agreement dated August 10, 2022 with Lincoln Park Capital Fund LLC~~
10.2*		~~Registration Rights~~ Agreement dated ~~August 10,~~as of November 14, 2022, ~~with Lincoln Park Capital Fund LLC~~by and between Dolphin Entertainment, Inc. and NSL Ventures, 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 because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	Dolphin Entertainment, Inc.

	By:	/s/ William O’Dowd IV
		Name: William O’Dowd IV
		Chief Executive Officer

	By:	/s/ Mirta A Negrini
		Name: Mirta A Negrini
		Chief Financial Officer