Greetings, and welcome to the Dolphin Entertainment Second Quarter 2020 Earnings Call. All participants are currently in listen-only mode, and a brief question-and-answer session will take place after the formal presentation. This conference is being recorded. It is my pleasure to introduce your host, James Carbonara. Thank you. Mr. Carbonara, you may begin.

Thank you, and once again, welcome to Dolphin Entertainment second quarter 2020 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer, and Mirta Negrini, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed quarterly reports on Form 10-Q as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. Now, I'll turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

Thanks, James, and thanks everyone for joining today. What a day, right? As many of you may have just read a few minutes ago, we announced our latest acquisition, the influencer marketing firm Be Social. So I'm going to start by talking about this exciting news before proceeding in the usual order of highlighting some top-level financial results and then providing some operational updates before turning it over to Mirta to dive deeper into our financial results. And of course, we'll take questions at the end. Okay, so let's start with Be Social. We love this company and bringing social media influencer marketing into our Super Group was the single biggest priority for Dolphin Entertainment this year. Let me just go off script for a minute. All right, I'll scare James here for a moment. Sometimes it's just easier to speak in plain English, right? Okay, here we go. We're in the business of creating and executing the very best in entertainment, PR and marketing campaigns. The basic principles of PR campaigns have never changed since silent movies. You build awareness and the ever-elusive buzz or hype among consumers for a piece of content. Now, within our companies, that piece of content or product may be the next James Bond movie or the next HBO hit series, but the basic principle of what you're trying to do hasn't changed for 100 years. What has changed is the where. Where are you marketing? Where are you executing your PR campaign? Well, news flash, this is 2020, and where you are marketing is increasingly online. In today's world, PR campaigns are won or lost online, buzz and hype are created through social media, and word of mouth is spread on Instagram, not at the office water cooler. And that was even true when people actually went into their offices. It's that simple. Online is where the consumers are, period. And here's one more thing to think about. It's not just the consumers that are online. The content is online. When we design PR campaigns for a new album for one of Shore Fire's clients, we're promoting towards the purchase of that album on iTunes or adding it to the consumer's playlist on Spotify. 42West is running campaigns for 145 Emmy nominations this year, a new record, I might add. And the vast majority of those nominations are for shows or for performers on shows that come from streaming services. That's online delivery. If the content is online, we need to meet the consumer in the environment that they are watching the product. It's the old saying, fish where the fish are. Thus, you can see why Be Social was the highly strategic acquisition for us. We've already got three world-class PR firms. We believe we're the only company in America, let alone the only company on NASDAQ, that has more than one PR firm listed in the top 50 most powerful PR firms in the United States. Now we've just added our first choice of influencer marketing companies, so that we can design and integrate social media influencer campaigns for our clients, combining them with our world-class PR capabilities. We can sync the promotional calendars online and offline. That's the idea. Okay, so with all that said, back to the script. With Be Social in our entertainment marketing Super Group, we'll be able to immediately cross-sell these services. We can plug and play across all three of our PR agencies. Think of the door. Influencer marketing is one-on-one these days with the promotion of any consumer product. Also, when the hospitality industry comes back, influencer marketing is the very first thing you coordinate for the launch of any restaurant or hotel opening. You need influencers to come visit and talk about it online. It's back to today's word of mouth that I just mentioned. But it's not just the door. Music today is marketed with social influencers. Anyone ever hear of TikTok? You may have seen it once or twice in the news recently. Well, guess what? Do you think the music industry pays for promotion with popular influencers on that platform? You get the idea. So we went looking for the company that we felt would best fit within our Super Group. And we chose Be Social for several reasons. First, Ali Grant, hands down. Ali founded Be Social years ago, and she's the CEO today. She's instinctive with social media. She's a thought leader in the space. She's energetic, and most importantly for us, she's collaborative by nature. She epitomizes what we want next-generation leadership to be within the Dolphin family. And I know she's ready for and can handle what's coming, which is that all three of our market-leading PR firms are ready to work with her right away for the benefit of our entire roster of clients. We're very excited about this acquisition, and it's exactly the next vertical we wanted to add to our Super Group. We've now got PR across every major entertainment industry, a market-leading social media and influencer marketing group, and the video creation capabilities of Viewpoint that can serve as online or offline campaigns. You can just feel the momentum that comes from these types of collaborative synergies. Okay, so with all that said, I'll answer any questions about what we shared about Be Social during the Q&A afterwards. And I'll segue to our financial results. Well, we exceeded both our internal and analyst expectations for the second quarter. And honestly, it's a tribute to Ali and Be Social that we didn't lead with this statement, right? Revenue was $5.1 million, beating both internal and consensus expectations, which we are very pleased about for this quarter that was most impacted by COVID. More importantly, operating results also beat internal and consensus expectations, coming in at a loss of only $179,038, which includes depreciation and amortization of $496,461. Obviously, depreciation and amortization is a non-cash item. So it bears repeating. We had an operating loss of less than $200,000 that includes almost $500,000 of depreciation and amortization expense. In any other quarter, that would have been our headline. Turning to operational updates at each of our four subsidiaries, or I guess actually four or five now, right? In order of acquisition date, I'll start with 42West. Well, how's this for a sub-headline to the sub-headline? 42West has set a new internal record for Emmy nominations. Their extraordinary range of client work has resulted in 33 different programs and individuals earning a total of 145 Emmy nominations. This is where I should sip some water to let that sink in, right? The nominees include the HBO Limited Series, Watchmen, which leads all programs with 26 nominations, including outstanding drama series. The nominees also include Pop TV's comedy Schitt's Creek, a 15-time nominee, including nods for outstanding comedy series and for all four members of its principal cast. I know there is tremendous love for that particular series, and I need to give a special shout-out to the 42West team for having elevated the awareness and recognition for that incredible series, that I believe started as a network series in Canada, initially unavailable in the United States. Truly incredible work. Additional well-known nominees include HBO's Curb Your Enthusiasm, Insecure, Westworld, and Bad Education. Actress Meryl Streep for HBO's Big Little Lies. Director Lesli Linka Glatter for Showtime's Homeland. Producer Shawn Levy for Netflix's Stranger Things. And various creative artisans for their work on Amazon's The Boys, Carnival Row, Jack Ryan, The Marvelous Mrs. Maisel, and Tales from the Loop. Switching to the Door, since we last spoke on July 13, just a couple of days later, the Door announced the opening of both Virgin Hotels Nashville and Kenoza Hall located in the Catskills region in New York, as well as the reopening of Virgin Hotel Chicago, in the Viceroy, Santa Monica, which is just completing a $21 million renovation. The hospitality industry, though, is hurting; there's just no other way to say it. But we're starting to see the first signs of life, especially in New York. With that said, I don't believe we'll see a return to normal, whatever that means, through the rest of 2020, and we have to be prepared to wait out a vaccine or some other answer for COVID before full resumption of the restaurant and hotel business. However, as noted in our Q1 earnings call, the Consumer Products Division at the Door is really having a fantastic year, and the third quarter is markedly up from the second quarter. So we can rely on the increase in business there to help us continue to offset the loss of hospitality business. As for Viewpoint, our goal this year was to broaden their client base to include many corporate clients, and that focus is really paying off for us. Of all of our companies, they probably had the best second quarter, as there is consistent demand for the creation of videos to use in marketing campaigns online. Here's where I should probably take a second sip of water and let that sink in, and let folks think about our social acquisition. Okay, now, where was I? Yes. I just said Viewpoint probably had the best second quarter among all of our companies, since there has been consistent demand among corporate clients for the creation of videos to use in online marketing campaigns. One example of this will be that Viewpoint completed the strategic design and full-service production of a branding campaign for longtime client direction funds to introduce a new lineup of strategic weight ETFs. Now that's a great corporate client for Viewpoint. On the traditional client side of entertainment networks, we also announced the brand spot the Viewpoint did for CBS News. Those two announcements show the balance we'd like to strike between Viewpoint's legacy, the best-in-class work for the leading media brands in entertainment history, such as CBS News, as well as CNN, HBO, Showtime, Discovery, and ESPN, among others, with the expansion of that heritage and experience into the corporate world. With Shore Fire media, we saw revenues decline slightly and hold steady throughout the second quarter. As noted on our call last month, the promotion of music is heavily online now. Don't worry, I won't take another sip of water. That has allowed Shore Fire's drop in revenues to be relatively modest, even with the loss of the live event and touring business. With that said, and one month later from when we last spoke, we don’t believe that live events and touring will restart in 2020. And much like the hospitality business for the Door, we have to be prepared that revenues will be impacted until there's a vaccine or some other answer for COVID. However, we are seeing a consistent steady drumbeat of clients that are creating and releasing new music, which gives us the opportunity to provide PR and marketing services. And I can tell you, we expect to see magic from the combination of Shore Fire's incredible PR campaigns in the music industry with Be Social's influencer marketing capabilities. That's going to be fun to watch develop. On the production side, nothing much has changed since we last spoke five short weeks ago. We have two great projects ready to go. The wedding comedy Sisters Before Misters with Lea Thompson attached to direct. And the road movie, action thriller, Special Delivery with Vaughn Stein attached to direct. We're actively casting both projects and believe we are very near having a lead actress to announce on Special Delivery. We're also waiting on both projects as the rest of the independent production community for a solution to provide production insurance around COVID. Encouraging signs of the past few weeks would definitely have to include a government-backed solution that was announced in the UK. That country is now ramping up to full production, and I would expect that Canada will follow suit shortly. Hopefully, that will allow for a business or government solution to be reached here in the U.S. All right, so those are the operational updates. Before I turn it over to Mirta, I'll just do a quick rundown memory lane. When we uplifted to NASDAQ in late December of 2017, we talked about building an entertainment marketing Super Group of six companies over the following three years. We have never wavered from the strategy. We knew exactly the types of companies we wanted, and we chose those types of companies based on their ability to work together and cross-sell their services. Well, today we just brought in company number five, and just like the other four companies before them, Be Social led by Ali Grant was our first choice in their vertical. Think about that for one second, we've been blessed to get our first choice in every single vertical we've acquired. We have 42West for film and television, The New York Observer's the most powerful PR firm in Hollywood. We have the Door for hospitality, lifestyle, and consumer products. We have Shore Fire Media for music. All three of our PR firms are considered top 50 in this country from all industries. We have Viewpoint Creative for branding and video creation. And now we have Be Social for social media influencer marketing. We don't curse here at Dolphin headquarters, so let me just say, are you flipping kidding me? And all these companies, each with their own specialty, they all want to work together. Does anyone wonder why we're so excited? At this point, I'll now turn it over to Mirta for a more in-depth view of our financials.

Thank you, Bill, and good afternoon. Revenue for the second quarter of 2020 was $5,194,725 as compared to revenues in the second quarter of 2019 in the amount of $6,273,983. The anticipated temporary decline in revenue is due to the pandemic, which impacted the Door the most. The revenues in each of these quarters were fully derived from our entertainment, publicity, and marketing segment. Overall, operating expenses decreased by approximately $2.1 million during the three months ended June 30, 2020, as compared to the three months ended June 30, 2019. Direct costs decreased by approximately $600,000 for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, primarily due to the elimination of certain Viewpoint's fixed costs. Selling, general and administrative costs decreased by approximately $93,000, mainly related to a decrease in travel expenses during the three months ended June 30, 2020, as compared to the three months ending June 30, 2019. Legal and professional fees decreased by approximately $86,000 for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, primarily due to decreases in audit and accounting fees. Payroll costs decreased by approximately $1.3 million during the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, primarily due to the salary and staff reductions as a result of the decrease in revenues due to the effects of COVID-19. Our operating loss for the quarter ended June 30, 2020, of approximately $179,000, includes non-cash items from depreciation and amortization of approximately $500,000, as compared to an operating loss of approximately $1.2 million for the quarter ended June 30, 2019, including approximately $500,000 of non-cash items from depreciation and amortization. Net loss for the quarter ended June 30, 2020, was approximately $2.9 million or $0.12 of basic loss per share, based on 23,596,206 weighted average shares, and $0.12 diluted loss per share based on 25,299,336 weighted average shares. This compares to a net loss for the quarter ended June 30, 2019, of approximately $800,000 or $0.05 per basic loss per share on 15,969,926 weighted average shares and $0.05 diluted loss per share based on 19,172,087 weighted average shares outstanding. We should note that during the quarter ended June 30, 2020, we reported beneficial conversion features on the conversion of several notes payable in the amount of $856,863 that is recorded in interest expense. We also recorded net losses on changes in the fair value of liabilities in the amount of approximately $1.7 million. During the three months ended June 30, 2019, we recorded gains on changes in the fair value of liabilities in the amount of approximately $723,000. That concludes my financial remarks. I will now ask the operator to open the phone lines for Q&A. Operator, can you please poll for questions?

Our first question comes from Jack Vander Aarde with Maxim Group. Please go ahead with your question.

Great. Good evening, Bill and Mirta, solid 2Q results. Congratulations on the acquisition. Thanks for taking my questions. So I'll start with Bill, and we'll start with the obvious topic, the acquisition of Be Social, which is the latest addition to your Super Group roster. So this is a leading influencer marketing firm. And I see in the 10-Q, if I go towards financial-related questions first, total consideration paid looks like about $2.2 million or so. Wondering, Bill, if you can provide any historical run rate to Be Social's revenue and operating income? Is that something you can provide at all?

Yes. Thanks, Jack, and thanks for the kind words about the quarter, which we certainly feel good about as well as this acquisition. Yes, we're not talking about historicals on Be Social for competitive reasons, much like we did for Viewpoint and others before it. But it's an extremely well-run company, profitable, immediately accretive for us. And we expect to be able to generate significant growth just by introducing them to three PR firms worth of clients. So, yes, we're pumped for that.

Okay, fair enough, and that's helpful. I'm happy to hear it's immediately accretive. And then, as you look forward to the future, can you maybe talk about the overall cross-selling opportunities this acquisition creates? I imagine there's cross-selling opportunities from Be Social across all of your existing Super Group divisions. But just wondering if you can talk about which of your existing divisions that you think may benefit the most in the near term in terms of revenue synergies from Be Social? And then, which of your businesses will benefit more mid to long term?

Certainly. Let me refer back to what we discussed in Q1 because Be Social illustrates the potential for growth when adding companies to a Super Group that want to collaborate and cross-sell their services. Consider how this works: as a single company, there are no opportunities for cross-selling. With two companies, there’s only one connection available. However, as we expand to five companies, Be Social can now engage with all four others, enhancing the connections significantly. This progression goes from one to three, then to six, and ultimately to ten connections. Notably, this connection represents a highly sought-after skill set among our PR firms. It’s clear that not every client of the Door wants to engage in social influencer marketing campaigns, especially in sectors like restaurants, hotels, and consumer products. If I were to focus our efforts, I would start with the Door. Additionally, the rapid growth of TikTok in the past year is a key factor in music marketing, as is the prominence of music videos on YouTube. Effective music marketing today relies heavily on online efforts. This is where Shore Fire comes in, having already established a division dedicated to PR for influencers. They are leading the way in this evolution, which will only enhance their capabilities. Moreover, many influencers are essentially celebrities in their own right, and the potential for cross-selling and synergies is evident. You raised an interesting point about the future, and I thank you for that. Be Social might serve as a hub for future acquisitions, particularly as it focuses predominantly on influencers in beauty, fashion, lifestyle, and wellness. Yet, there’s a whole other category around video gaming, e-sports, and more, where online influencers are vital for reaching certain demographics. Finding a 19-year-old boy watching TV today—outside of live sports—is quite the challenge. We believe that bringing in Be Social will be beneficial for all three PR firms right away and also allow us to expand our online presence significantly. We are currently exploring these opportunities, which is why Be Social is a strategic addition for us.

Got it. That's very helpful, and I appreciate your enthusiasm too. And it gets me excited. And then maybe if I just touch on just some of your existing businesses without digging too much further into Be Social. I just want to touch on Viewpoint for a second. You highlighted them as a star performer during this quarter. So first, just so I understand that this means that Viewpoint contributed maybe the highest percentage of total revenue during this quarter than it ever has in history? Is that what I understand?

I think in terms of previous quarters, quarter-over-quarter and year-over-year, Viewpoint performed the best in the second quarter, both on a revenue and on operating profit basis. They had a tremendous quarter. And, it's a small company versus our PR firms, but they have the chance to have the highest and best margin and in pretty short order, because when we're adding corporate clients every month and when you build a corporate practice that's equal to their entertainment industry leading practice, the margins are just very exciting. And there's just more opportunities too. I mean, obviously, for every one company in the entertainment space, there are how many in the general corporate world? There are very strong complements to the Consumer Products Division of the Door. And there is a great example of one of the previous links. They're working on the largest contract in the Door's history right now. We're not at liberty to speak about it, but it's a significant contract. And that's a consumer product company that then hired Viewpoint to do the video to complement the PR campaign that the Door is doing. So those types of complimentary skill sets, we've seen it work when Viewpoint can serve as all three of our PR firms, it will very quickly work with Be Social as well.

All right, fantastic. Well, I'm excited for you guys. And great quarter again too with the results as well. I don’t want to overshadow. So, I appreciate the time. I'm going to hop back in the queue. Thank you.

Thank you, Jack.

Thank you. Our next question comes from Allen Klee with National Securities Corporation. Please proceed with your question.

Good afternoon. Can we start with 42West? I’m trying to understand that while there is an advantage with a lot of content being released, there could also be challenges related to production for your customers. How should we approach the expected developments in this area on a sequential basis? Do you believe this segment will continue to grow over the next few quarters, or do you foresee something different?

Yes. No thanks, Allen. It will be growing, because in the second quarter as I mentioned, on our first quarter earnings call, 42West had the benefit of increased work from streaming services, right. We've got a tremendous number of streaming service, series, and movies for the streaming services. Obviously, we're very blessed with those semi nominations, right. But it was offset by how COVID impacted 42West was affected by production shutdowns. So, talent went on hiatus for PR services because they weren't on shows to promote. So as production restarts, yes, our pipeline will be filled for theatrical movie releases that will promote and new streaming services series, but where revenue will quickly get back, we hope and certainly be ramping up in the third quarter in the fourth quarter is that many of our television celebrities will come back on fee because their shows will be back in production and soon back on air. So that's how COVID most impacted 42West, I would say.

Could you provide some insight into the large studios and streaming platforms regarding their plans to restart production? Additionally, you mentioned exploring opportunities in other countries for independent productions. Can you elaborate on when you expect that to happen in the U.S.? Or does it even matter if it's in the U.S. since your companies can produce films outside of the country?

Sure. Yes, I'll take those questions in that order that you asked them. Well, for studios and networks, we're seeing them get start to go back into production, which is great news for all of us in the industry. They can do this, because they can self-insure. So if there's a COVID outbreak on their set, they can afford to shut down for a couple of weeks, try and get it back under control and restart. And they're building the cost of that into their budgets or the possibility of that into their budgets. And we're seeing our director and showrunner clients and our acting clients go back to work. And that's fantastic news. And I should say too, for that, we're on the theatrical movie, which is still a meaningful part of the 42West business, of course. We're hopeful that with theaters gradually reopening here in the U.S. we will be able to return to promoting movies, maybe as early as late third quarter and certainly in the fourth quarter. Some of our major franchises are still tracking to open on time in the fourth quarter. So we've got James Bond, right in November, we've got Top Gun. We have quite a few projects actually lined up for the fourth quarter. Theatres are open in Europe and Asia now. They've stayed open, which is nice to see. So let's see how it goes over the next few weeks, and if so, then those properties will go and of course, we have our very, very healthy independent film business that we promote when they go into theaters. For production in the U.S., for independent production, the issue simply is insurance. If you've got an $8 million movie and you risk shutting down for two weeks, you're probably talking about a $500,000 to $1 million expense. And there just isn't backstop to that for 95% of all producers. So you're waiting to have an insurance policy much like you have in case there's an accident on set or a hurricane comes through your set, or whatever it might be. So we need to wait for that. But with the UK creating a government solution, with Canada expected to follow shortly to your previous point, Allen, we may be able to shoot our movies in Canada. Fantastic. We shot many times up there over the years. Or hopefully, it'll prod a business or government solution, which is actively talked about every day here in the U.S. We're waiting it, but hopefully we won't have to wait more than another few weeks to know if and when we can shoot safely in the U.S.

Great. So my last question, just to try to understand kind of all the pieces of what that maybe means, it sounds like 42West will be improving, the Door hospitality is very, very slim, but bits of coming back. But the consumer division is growing, so that'll be a positive. Viewpoint is growing with corporate. Shore Fire is kind of stable. Production is a question mark, and then whatever Be Social adds. So it sounds like when you add them all up, it's kind of moving upward to some degree. Is that the way to look at it?

Yes, we're growing. And the worst, we believe, is behind us for all of our companies; some are going to accelerate faster than others. But we're growing across every company and then we just have to Be Social. So, it's exciting times for us.

Okay, thank you so much. Congratulations.

Sure. Thank you.

Thank you. There are no further questions at this time, I'd like to turn the floor back over to management for any closing remarks you may have.

Well, thank you. And I appreciate everyone for joining us today, very happy to be able to announce and deliver our fifth company with Super Group. And hopefully, I'll take Jack's word for it, that our enthusiasm came across on adding Be Social to our companies. I can tell you within our companies, the excitement is certainly there. Texts and emails are flying as we speak. The things to look for before our next earnings call would be continued milestones around. Maybe we'll be able to even add one more member to our family. We certainly are expecting to do so by the end of the year. And that would be a nice conversation to have. And then I think we should definitely look at how we can utilize Be Social to expand our online presence. So, we appreciate everyone's time. And thank you for joining us today. And we'll look forward to talking again next quarter.

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.