Greetings. And welcome to Dolphin Entertainment Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, James Carbonara of Investor Relations.

Thank you, and once again, welcome. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I would 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 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 would like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

Thanks, James, and thanks everyone for joining. I know there's an intense amount of interest out there to hear more about our NFT division. The number of incoming calls and emails since we made that announcement have been numerous, and I don't think there's any announcement we've ever made that's gotten quite that same reaction, and we're excited for that. Obviously, we released some pretty exciting news about the NFTs today, but we thought we'd address both the news of today upfront and before I get into the NFTs, I'll turn it over to Mirta to explain the 8-K we filed after market today. So, we can explain that and then we'll dive into the NFTs, talk to you guys for about 10 minutes and take some questions. Okay.

Thank you, Bill, and good afternoon. While preparing our year-end financial statements, we determined that we had incorrectly evaluated our role when completing our work under certain statements of work. Specifically, we originally concluded that we were acting as principal, but subsequently concluded that our role was that of agent. When reporting revenue under the role of principal, revenues are reported gross, with corresponding expenses being reported gross. When reporting as an agent, the amounts are reported net of each other. In this case, we reported pass-through expenses reimbursed by our client in both revenue and expenses. As a result, for the three months and nine months ended September 30, 2020, we over-reported both direct cost expense and revenue in the amount of $862,710, thereby offsetting each other and resulting in no change to our loss from operations, net loss, or loss per share in our consolidated statement of operations. In addition, the error did not impact our consolidated balance sheet or consolidated statements of cash flows. We will be correcting the error on our annual report to be filed on Form 10-K, at which time we will schedule an earnings call. I’ll now pass it back to Bill to continue the discussion on NFTs.

Sure. To elaborate further, we conduct influencer marketing campaigns for many of our public relations clients. When engaging in these campaigns, it is essential to ascertain whether we are the principal or merely acting as an agent for the client. If we are the principal, we report the revenue and expenses; if we represent the client as an agent, we report neither. This is what we plan to correct in our Q3 report within our 10-K filing. We will take the necessary time to make this correction and submit the report before discussing our Q4 results and providing insights on our predicted performance for Q1 and 2021. Moving on to the next topic, the NFTs. I will also discuss Dolphin 2.0. For those who are new to the Dolphin narrative, here’s a brief overview. Over the past three years since our NASDAQ uplisting, we have been acquiring leading entertainment marketing firms. 42West was our first acquisition, recognized as a leader in marketing for film, television, and content. They have received numerous awards. We have also partnered with outstanding PR firms in their respective fields, such as Shore Fire for music, The Door for culinary and live events, and we brought on B/HI in January for gaming and eSports. Notably, all three of these PR firms are ranked among the top 50 out of 12,000 in the U.S., and we are the only company owning more than one of these firms, all focused on the entertainment industry. To enhance this entity, we have incorporated influencer marketing through Be Social in August since we engage in many campaigns with our PR firms. Additionally, we have Viewpoint for creative brand studio work and promotional videos, which will support our NFT initiatives. The overarching goal of uniting these businesses was to advance Dolphin 2.0. Since our initial road show prior to uplisting in 2017, we aimed to have six companies by January 1, 2021, which we have now achieved. As I often pose during my presentations, considering we have amassed this unique collection of premier entertainment marketing firms, what would you do with it? Our answer is Dolphin 2.0, where we plan to start owning some of the assets that we market, and we are very enthusiastic about this development. The CEOs of each of the companies, we've been with them, we've been pointing to this day as our starting line. Matter of fact, I'm doing this call from a hotel room in South Beach, where I'm from Miami, where we've gathered all the CEOs to actually do a two-day summit about Dolphin 2.0 and the rollout of all the different opportunities we have. Of which, NFTs are one. We have several others we're excited to share with you later this spring and summer throughout the year. But NFTs have gotten a lot of notice since we had them in our sights for a couple of months now; it started the year. They've exploded, I think it's fair to say, in the last four weeks or five weeks. So what I thought I'd do because of the intense amount of interest, I'm going to spend a few minutes and share a little background, educate some people on the call that have asked to know more about NFTs and then do some fair reporting of why some people think they're just a bubble, a fad, and why others think they're a good opportunity and why we think they may represent even more than a good opportunity. So, all right, here we go. So the NFT, first, let me frame it. NFTs were widely credited starting in 2017 with things called CryptoKitties, but they were very small. In 2019, the total volume of NFTs sold is reported as $60 million. In 2020, the total volume grew to $250 million, four times growth. But in February of this year alone, that one month, NFTs sold for over $330 million in one month. So we and others think that this will be $4 billion or $5 billion NFT sales in the calendar year 2021. So to go from $60 million to $250 million to $4 billion or 5 billion, that's something. And in the last month alone, it's hit a little bit of the top culture. I mean, Gronkowski NFT sold. Beeple sold his art for $69 million. Patrick Mahomes dropped his on St. Patrick's Day, which is a brilliant marketing myth. If anybody knows if he wants a second career as a publicist, please have them call. Jack Dorsey, the founder of Twitter sold his original tweet as an NFT for $2.9 million. A lot of the top culture, right, us did a great skit on it. And so now a lot of people are talking about NFTs and since we've made our announcement a little over two weeks ago. The argument for some people out in the world, glass half empty usually starts with, well, it's a bubble, right, and it's going to crash, like 1927 or something. Usually fueled by the fact that there's a misperception out there; they don't really understand the NFTs and what they are. Blockchain technology confuses a lot of people, and it feels like an art bubble. Will someone really pay another $5 million for a piece of art, et cetera, et cetera. Well, the answer is, I don't know. And I honestly it's not relevant to how we look at NFTs, because on the glass half full side, we saw the potential and see the potential of NFTs as collectibles, as memorabilia. What spurred us to put this and accelerate NFTs as one of the 2.0 ventures we will do this year in the bucket we call consumer products is because of the success of Top Shots for the NBA and the fact that we have a history of selling and promoting the sale of collectibles and memorabilia. And when we think about Dolphin 2.0, we're looking for sectors we can get into where our expertise will most influence the success of the product. So I assume we could design fantastic marketing campaigns for electric vehicles, but we don't have any expertise in electric vehicles. We have a ton of expertise in marketing the very best of top culture and collectibles. I mean, 42West is out there doing PR for James Bond, for Top Gun, for Mission Impossible, for a slew of independent films, probably dozens of streaming series a year. Shore Fire is promoting hundreds of album drops, singles drops a year, concert tours. Obviously, the Door represents the three largest food and wine festivals in the country. It's those types of things in the sports memorabilia and entertainment collectibles market that we think is the true value in these early years of NFTs. And obviously, the NBA has done a tremendous job creating a digital version of trading cards, right? And I don't know how many on the call have bought one of the moments from NBA Top Shots, but they did $45 million of business in one day in February. And that four-dimensional cube they have is something we think was brilliant and that we think we have relationships that would want to play in the NFTs space with us. Obviously, we formed a partnership with the NFL Hall of Fame. We certainly announced today and a lot of people have complimented and congratulated us on the initial announcement of the first NFTs we will be bringing to market, will be unique collector's items around three of the men who are the most exclusive club in football. There are three of the 10 men that have won a Heisman Trophy and also been inducted into the Professional Football Hall of Fame: Earl Campbell, Tim Brown, excuse me, the great wide receiver from Notre Dame, and Doak Walker. There will be more coming and that's very exciting for us. And to put the collectibles market in perspective, the total in 2019, the sales revenue from licensed merchandise and services was about a $300 billion industry. We think there’s a tremendous amount of growth from where NFTs are today in the digital world into what the physical world has of $300 billion for collectibles. A second reason for optimism regarding our companies is that many brands have started using NFTs as promotional items in the past 30 days and will continue to do so, including Pringles, Taco Bell, Charmin, and Pizza Hut. The ability to sell digital art along with promotional items is becoming a tool that all PR firms and marketing agencies aspire to use. The non-fungible token, which comes with a smart contract, is significant because it allows the offering of real-world benefits alongside the sale. For example, you could attach a 20% off coupon to each token, whether those digital tokens are sold for $1 or $10. I am particularly excited about collectibles, such as selling a piece of art or a trading card featuring football players. When these items resell, you would receive a percentage of that resale, regardless of whether the resale price increases or decreases. Currently, the average resale percentage is around 20%. Thus, with every resale of that piece of art, you can earn a commission indefinitely. This essentially creates an annuity, a concept well understood in the entertainment industry, similar to the library value for a studio. Our objective with Dolphin 2.0 is to own or co-own the assets we promote. This strategy enables us to continue monetizing those assets over time, especially by finding ways to cross-promote among them, which is one of our greatest strengths. We plan to incorporate NFTs into movies, TV shows, music, and other entertainment areas, as well as sports, and we see numerous opportunities for yearlong cross-promotional initiatives. We are very excited about this potential. But as I talk about, which one is it, the glass half-empty or the glass half-full, I’ll give everyone on the call a third option, which is what made us want to get into this business and where we think we can be very successful at it. We think that the glass may not just be half-full. It may be completely full and overflowing. Why? Because NFTs to us, there are going to be two reasons. The first is, realign your thinking into, are they a disruptive delivery mechanism? What they're really doing is creating digital delivery of a collectible, right? Have we ever seen one of those in entertainment? Well, for those of us who’ve been in business a few years now, we have and it’s called Netflix. When you think about Netflix, it’s a single product company, a single product, right? And for the majority of their lifetime, they delivered other people's content, right? Studio content, television content, but they delivered it better, originally by mail, DVDs by mail and then on the digital delivery system, right? Now for the last eight years or so they've made their own content as well. When you do a digital delivery system like that and a more efficient delivery system like that, it’s immediately global. The NBA is doing very well and I’m sure they’re very excited about the fact that they can drop digital playing cards that they don’t have to produce, package, ship, close retail deals, take back unsold inventory, account for inventory and not have to go through customs to create an international program. All of that is done in a digital delivery system, and it reminds me very NFTs for collectibles, not for art that I’m not making any opinion on. I have no idea if the art world is in a bubble or it's going to expand. But I'm very excited about the collectibles and memorabilia market for sports and entertainment for digital delivery of that. We currently promote a wide range of collectibles within the entertainment industry. Our partnership with the Hall of Fame Village & Resort in the sports sector is something we consider to be exceptional. We are eager about this collaboration. However, the primary reason for our enthusiasm regarding NFTs, and why we believe the NFT market for collectibles could surpass the physical collectibles market, lies in a significant observation. If the NFT market is valued at $4 billion or $5 billion this year, could it potentially grow to exceed the physical collectibles market within three to four years? That would require it to increase by 100 times to $400 billion or $500 billion, or even more. What could drive such a dramatic increase in market size in under four years? A crucial point that has not been highlighted in many articles from reputable sources is that most NFTs can only be purchased by individuals who possess a crypto wallet and have Ethereum. This realization prompted us to expedite our NFT initiatives. Imagine the impact when the marketplace begins to accept credit cards. We have been actively discussing a partnership with a popular young adult movie franchise that could market customized animated posters of their hit films, priced between $50 and $100, turning them into collector's items while also providing real-world benefits linked to the tokens. Picture the possibilities, such as exclusive interactions where buyers can join a Zoom call with their favorite actor after purchasing a poster. This could lead to exciting opportunities, but currently, our main audience of 15 to 25-year-olds is unable to participate as they do not have Ethereum wallets. What will happen when they do? Since we did our announcement two weeks ago, we did a lunch and learn across all of our companies last week and mentioned this, and said guys, I really do believe that by the end of the summer we’re going to have a whole bunch of these marketplaces for NFTs right now a little bit of a wild, wild west or eight or nine leading marketplaces, only one of which currently even can take a credit card. What happens when they all take credit cards? And so this past week, a couple of nice announcements out in the marketplace occurred; Tom Brady, of course, announces a new initiative in NFTs, and I think that was great for us, validates the market, tells people this is something more than a passing fad and also repositions NFTs for the first application of NFTs towards collectibles and memorabilia. We’re excited for future applications too. But the other announcement that kind of went under the radar, I don’t know if a lot of people noticed, Visa announced it was working to accept transactions and settle transactions from cryptocurrency. To us, that’s the floodgate. And I don’t think we’re talking about a market last year that was $250 million in 2020, $4 billion or $5 billion in 2021. We think this is sure the future, but pretty much the now. And that’s what’s got Dolphin excited about it and when we think about what our potential is in this space, we know a couple of things very, very well. We believe we promote end-market entertainment better than anybody in the world. We have the leading PR firms in entertainment all under one roof. And we have relationships with the artists, the digital artists that will allow us to make the very best content for NFTs. So, if we’re talking about trading cards and memorabilia to begin with and there’ll be many more applications, right? When you talk about that, top culture is going to be a major sales point for NFTs. I think we can all agree, sports and entertainment, I think, will be the biggest application. Who are the artists that are helping make this initial wave of trading cards, collectibles, et cetera? Well, the best digital artists in the world, where do you work if you’re one of those? Hollywood. And guess what we call them? Animators, right? Visual effects supervisors, right? The very best of the best, the folks working on the Marvel movies, well do we know them? We’ve read many of them and that’s what’s got us excited. We can both develop intellectual property, we can produce the NFTs, we can negotiate our own storefronts on the gateways, on the marketplaces, and we can promote the sugar out of them. And we’re very excited about our first partnership with the NFL Hall of Fame Village & Resort company and we have some great NFTs we’re happy to announce now. We’ll have many more in that partnership in the coming weeks and we’re going to have many more partners in the coming weeks that we’re excited to announce, a whole slate of initiatives in the NFT world. So that’s a little bit about what’s got us excited about NFTs. Why did Dolphin enter into it? Why we think we’re positioned to do very well in it and I know there’s a lot of interest, I’m happy we got the opportunity to actually share that with you today in advance of a full earnings call when we file the 10-K. So, with that said, I’ll turn it over and back for any questions.

Thank you. Our first question is from Allen Klee of Maxim Group. Please proceed.

Good afternoon. I just want to clarify my understanding regarding the restatement, which seems like it won’t affect anything on the financial side and is more of a timing issue for when the numbers are released. Additionally, can you share any information about the timeline for adding NFTs? It would also be helpful if you could explain the auction process and the associated economics, if possible. Thank you.

Thank you for your questions. Regarding the expenses and revenues, they balance each other out, and we will make the necessary correction when we file the 10-K, which will contain all the relevant information. As for the NFTs, we're thrilled about their potential. We’ve already identified the athletes in collaboration with Mike and his team at Hall of Fame, and we're particularly excited about the first three athletes. I recently spoke with Tim Brown, and he's a fantastic individual who is eager to see the artistic work we’ll create. We’ve also pinpointed our first visual artist and can't wait to announce that, which I believe will impress everyone. These projects tend to move quickly, as seen with Patrick Mahomes who had a rapid launch. We're aiming to introduce our offerings this quarter, with a strong focus on positioning them effectively, utilizing our brands, Dolphin and Hall of Fame, to drive engagement. Our goal is to create a dedicated destination for marketing and public relations, emphasizing that we're in this for the long term, not just a single release. Think of it as a film studio release calendar, allowing us to create significant promotional events. This swift process contrasts sharply with traditional movie releases, and we anticipate a quick rollout this quarter, with plans to accelerate in future quarters as our partnership with Hall of Fame grows. Considering our relationships in various industries, the potential for NFTs in collectibles, gaming, music, and more is incredibly exciting for our companies. This truly presents a 2.0 opportunity for us.

Given what you have said, please confirm if I’m understanding this correctly. It appears that, on average, this business would likely have a higher margin than Dolphin overall, which would enhance your margins. I understand you're not providing specific numbers now, but is that a sensible way to consider it?

Yes, absolutely. This business is definitely high-margin, especially considering the quality of our intellectual property and the partnerships we are forming. I feel fortunate to say that our PR firms are top-notch. There’s no doubt about it. They have more Grammy, Emmy, and Oscar winners than any other PR firm. For instance, during the Emmys last year, we ran campaigns that resulted in twice as many winners as the rest of the industry combined. When you start with such a strong foundation of intellectual property, it’s akin to the first person who looked at the Marvel comic library and thought about turning it into movies. The possibilities are overwhelming. We are indeed fortunate to have numerous partnerships and a wealth of intellectual property to brainstorm, develop, and launch new initiatives. As we consider this from our perspective, our goal is to be quick to market while being strategic about launching initiatives and promoting them across our companies. Does that clarify things for you, Allen?

That’s great. I have a question about the exchanges, which is a bit new to me. I think I’ll need to open a crypto account. Do you see yourselves working with multiple exchanges, or how does that work?

Yeah.

How does it work? Yeah.

Certainly. Regarding your question about high margins, we feel fortunate because margins can increase significantly when selling specific products at appropriate prices. Additionally, volume plays a role. For instance, limited edition NFTs can be sold individually at high prices, like those associated with Patrick Mahomes. This can be very lucrative. Conversely, you can also focus on promotional items or volume sales. Take, for example, a movie franchise animated poster. Imagine a high-quality animated poster designed by top professionals that you could sell in quantities of 10,000, 20,000, or even 30,000 at $100 each. Looking at what Top Shots is doing with their moments, they are releasing packs with a thousand cards each, albeit with limited availability, which is what drives resale value. This model can result in a very high-margin business because, in the digital space, the primary advantage is that you only need to create something once.

Right.

That's fantastic compared to creating a bobblehead doll where you need to produce around 10,000 units, factoring in breakage. You then have to manage storage, packaging, and shipping costs, which we don't have in this business at all. This significantly simplifies our operations and enhances our profit margins. Regarding the marketplaces, we haven't decided yet whether to consolidate our opportunities into a single marketplace or to diversify. Each marketplace has its own pros and cons that we're keeping private for now while we assess our options. We've been preparing for this announcement for several months, and I hope we can be recognized for entering the market early. Just a couple of weeks ago, we announced our partnership with Hall of Fame, marking our serious engagement with NFTs. This isn't about an individual selling a single artwork; we are building a business here and we're excited to share that. With our volume, we may create a different dynamic and leverage better negotiations with these marketplaces. I anticipate that we will likely choose a marketplace for each partnership, as we don't want to direct our Hall of Fame fans—or fans from other sectors—across multiple platforms unless there's a specific business justification. From a marketing and public relations perspective, consistency is key. Therefore, you can expect us to announce specific partnerships in this regard.

That’s great. Can you elaborate on Dolphin 2.0, where you will control the content and have the resources to promote it? Are there other areas you are considering besides NFTs, and could NFTs potentially overshadow other initiatives you were planning? How do you view that situation?

It’s been quite a journey. When we announced on Tuesday morning, I received more emails and phone calls than ever before. It has been difficult at times to keep up with everything. Nonetheless, several people remarked that when I mentioned the credit card line, it was a breakthrough moment for us. They responded by questioning why we would focus on anything else, given the immense potential. We are hopeful for success and are committed to working hard for it. That said, we also have various other initiatives in consumer products and content. We are planning live events for those who have followed our growth as we expand into different areas of entertainment where we believe we can succeed. Think about our unique collection; there’s no other group of top PR and marketing firms in entertainment like it. The question is, what can we do with it? NFTs are certainly one possibility, and honestly, I never anticipated that February would generate over $330 million in sales. Our progress has been rapid, and we felt it was the right time to launch. We also have other exciting developments in the pipeline in these areas. The purpose of bringing all the CEOs to Miami today and tomorrow is to discuss our ideas for those initiatives and how we plan to prioritize them in the market. We aim to be strategic about it, and over the next several months, we will announce how we are organizing ourselves for success across multiple initiatives.

Okay. Thank you so much.

Thank you, Allen. I appreciate those questions very much.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Bill O'Dowd for closing remarks.

Thank you everyone for joining today. We will work quickly to file the 10-K and include the correction for Q3. As mentioned earlier, we’ll hold a full earnings call, and we’re looking forward to sharing our Q4 and 2020 numbers, along with our guidance for 2021. In the coming weeks, we also plan to share additional insights about 2.0 and our approach to it. In this rapidly changing environment, we anticipate discussing the first entities in the market soon. These are exciting times, and we appreciate your continued support. We look forward to our next conversation. Thank you all, and we hope to talk soon.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.