Please standby your program is about to begin. Good day everyone, and welcome to today’s Dolphin Entertainment Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Please note this call will be recorded and I will be standing by if you should need any assistance. It’s now my pleasure to turn the conference over to Mr. James Carbonara, Investor Relations. Please go ahead, sir.

Thank you, operator. And once again, welcome to Dolphin’s third quarter 2022 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 statement 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 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 risk factors 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'd like to turn the call over to Bill O'Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed.

Thanks, James, and hi everyone. Good afternoon. And thank you for joining us today. As you might expect, I’ll start off the call by spending some time with breaking news of today’s bringing our social life to the Dolphin family, followed by an update on various Dolphin initiatives and a full financial review, and then we’ll open it up for Q&A. So, here we go. I’ll begin by giving a brief description of Socialyte. The company was founded in 2011, the early days of social media marketing, and Socialyte is an influencer marketing powerhouse, with teams in New York, Los Angeles, Miami, and Nashville representing some of the most sought-after creators, from digital-only to celebrity-level talent. Socialyte has a client roster of more than 125 market-leading influencers, including Jana Kramer, Lauren Bushnell Lane, Catt Sadler, and Mary Fitzgerald. For this high-end roster of talent, Socialyte secures thousands of campaigns each year with such leading brands as Amazon, American Express, Bose, Cartier, Target, and more. So, Socialyte has the talent roster and manages the talent’s careers and secures campaigns for the talent. Socialyte has a sister agency, Lytehouse, which also came into the Dolphin family, representing some of the world's most iconic brands, providing the full suite of services for influencer campaigns, from strategy and casting through execution and delivery, with in-depth analytics and reporting. So, Lytehouse approaches it from the brand side and delivers hundreds of campaigns annually with current and recent clients including Airbnb, Amazon, American Express, Ann Taylor, Armani Beauty, Audi, Conde Nast, Etsy, Keurig Dr. Pepper, Michael Kors, Perrier, Prada, Ralph Lauren, and W Hotels. Now that you know a little about Socialyte, let me describe why this is a highly strategic acquisition for us. I’ll give you three reasons. First, this gives us scale in influencer marketing with Be Social and Socialyte under one roof. We now have what we consider to be the leading influencer marketing agency in the entertainment industry to go along with our three market-leading PR firms in their respective verticals, with 200 influencers on roster and hundreds of millions of collective social media followers. Secondly, that scale allows us to take full advantage of the very strong brand spend growth across influencer marketing. It’s not just that in today’s DNA influencer marketing represents the “other half” of our media along with PR, it’s which verticals we are uniquely positioned across that offer the benefit of the scale we just achieved. Let me share some relevant stats. The influencer marketing industry has experienced strong double-digit CAGR over the past five years, increasing from global brand spend of less than $2 billion in 2016 to over $10 billion in 2021, with estimates of more than $14 billion in 2022, according to Grand View Research. So the industry is growing as any brand marketer can tell you. Both which categories use influencer marketing the most. This is why this is so strategic for Dolphin. Again, citing Grand View Research here, in 2021, fashion and lifestyle was the largest segment with 29% of total spend, which is the exact specialty of Socialyte, Lytehouse, and Be Social. Great. We’ve now built scale and leadership in the larger segment of the extremely fast-growing influencer marketing industry. But what about additional growth? The second largest segment in 2021 with 23% of total spend was food and entertainment, the exact specialties of Dolphin’s three market-leading PR firms. So, over 50% of total brand spend in influencer marketing last year went into fashion, beauty, lifestyle, food, and entertainment, the exact verticals represented by our super group. Collectively, the Dolphin Companies represent approximately 1,000 clients including global celebrities, feature films, television series, streaming services, musicians, venues, festivals, video game publishers, e-sports teams and leagues, culinary celebrities, hotels, toy companies, consumer product brands, and Web 3 and NFT projects, as well as awards campaigns for nominees in over 100 Oscar, Emmy, and Grammy categories in 2022 alone. Speaking plainly, when an influencer is considering where to call home, or a brand is considering how an influencer campaign can get noticed by the general consumer through the broad lens of pop culture and entertainment, we believe we have a unique proposition in the marketplace. For our PR firms, it cannot open a restaurant or hotel in today’s environment without an influencer marketing campaign. Our PR firm, Short Fire, would find a strong influencer marketing campaign extremely beneficial in launching a single, album, or concert tour. If you don’t think social media is important to launching music these days, you are respectfully living under a rock. You get the idea. Now, the third reason why this acquisition was strategic for Dolphin is that at the elite levels of Socialyte and Be Social, the influencers on rosters themselves have large enough followings to where they are celebrities in their own rights, and many have ambitions to be positioned to crossover into traditional media. Many more have launched a wide array of consumer products and business ventures. Our group is uniquely positioned to take advantage of this market opportunity. As influencers and celebrities seek to further spread their interests and monetize their platforms and followings, the rate at which they launch brands and products continues to rise. The categories of beauty, lifestyle, and fashion are particularly well-suited to influencer product launches, as demonstrated by countless examples in recent years. Perhaps the highest upside growth opportunity for Dolphin’s scale is Socialyte and Be Social, and it focuses on pitching, facilitating, and sharing the revenues created by influencer brands and content to generate further recurring revenue and value for Dolphin and its shareholders. Now that you know about Socialyte and our strategic rationale for bringing them into the Dolphin family, let me state that this transaction is immediately accretive. Socialyte has strong revenues and profits, they are growing, and with Socialyte, we believe we can grow them even faster by cross-selling their services to clients across our PR firms. With Socialyte and Be Social, we now expect influencer marketing to represent 25% or more of our revenues in 2023 and for more than that, I don’t want to get ahead of our 10-Q and 8-K filings. On those topics, we’ll wait until we have released that information. For final details, Socialyte and its 40-employee team will continue to operate under its own name out of Dolphin’s New York and LA offices, with, if I say so, the very impressive CEO, Sarah Boyd, and its entire staff welcomed into the Dolphin family of agencies. Furthermore, Socialyte Chairman, Evan Luzzatto, will continue as an advisor to Dolphin. All right, cool. Let’s shift gears to providing updates on projects where Dolphin and its shareholders have equity in participating the upside that our best-in-class marketing companies regularly enable for our clients and, by the way, for which going forward, Socialyte will provide another asset to use for the benefit of these ownership stakes. Since we last spoke in August, we held a soft opening on September 21 for Midnight Theatre, a new restaurant in Variety Theatre in New York’s Manhattan West, Brookfield Properties' latest neighborhood development between 9th and 10th Avenues and West 31st and 33rd streets. The night before our soft opening, we prepped the theatre with Peacock's premiere of the new romantic comedy, Meet Cute. Midnight Theatre's red carpet was stacked with national media covering the arrival of the film's stars, Pete Davidson and Kaley Cuoco. We had a sold-out show last Monday with the British singer, Raye, and while we seek to continue to ramp up the original programming in the theatre through the holiday season and into the winter, by which time we expect to be open every day of the week. The private events business in the theatre is already off to a terrific start. In the short time since the soft opening, we have held well over a dozen private events, some of which were full buyouts, meaning both the theatre and the restaurant, and the clients are top-tier including our programming sponsor, Mastercard, as well as Accenture, Ernst & Young, both of them happen to be neighbors inside Manhattan West Sheraton Tower, and L'Oréal, Paramount, Riot Games for our cool legal legends of that with Mastercard and SHOWTIME. Now turning to NFTs, on October 3rd, just after the quarter ended, we were pleased to report that our flagship NFT collection, Creature Chronicles, has entered galactic immersive storytelling experience from former Marvel Studios artist, Anthony Francisco, sold out in about 90 minutes on the afternoon of Sunday, October 2. The first Creature Chronicles collection developed and marketed by Dolphin’s Web3 division, We Come In Peace, minted on the Solana blockchain and features 7,777 custom-crafted avatars designed by Francisco, generating more than 13,175 SOL in primary sales at mint time, equaling about $435,000. We credit the success of the project to the stunning visuals from Anthony, the commitment of our team, and the dedication of our community. We are very proud of this success. With that said, though, we are very aware of the recent developments in the crypto space, and we’ll continue to monitor the space as we decide on prudent paths forward with our NFT business. I would like to point out that Dolphin has no exposure in the pending FTX bankruptcy proceedings and we have no assets inside FTX wallets. Our most recent announcement in late October was about a partnership with Nina Compton, the James Beard Award Winning chef and owner of Compère Lapin and Bywater American Bistro in New Orleans, to open together, ShaSha Lounge, a membership cocktail club and lounge in the Crescent City. Dolphin will be providing marketing services for fees and receiving a meaningful ownership stake in the venture, as well. The announcement was made as part of the first annual Fresh Mint Festival, New Orleans' Web3 conference and festival, where Dolphin executives moderated a panel on how web3 and NFTs are impacting the face of the food and beverage and hospitality industries. What I really like about this initiative is its inclusion of a variety of other celebrity chefs and its clear line of sight for national expansion and success. From the get-go, five major celebrity chefs have joined the ownership crew: Marc Forgione from New York, Stephanie Izard from Chicago, Michelle Bernstein from Miami, Rodney Scott from Charleston, and Tiffani Faison from Boston. Each of these chefs will visit New Orleans every year and offer custom menu items and cocktails for the general public and also provide unique experiences for those who become members. That alone immediately distinguishes this concept, and if you are a foodie, you know all five of those names, along with Nina Compton, six of the 12 chefs. But it also allows for the national expansion I mentioned; upon success in New Orleans, ShaSha can be brought to each of the other celebrity chefs' towns where they would have control of the concept and the menu and also take the largest share of profits supported by all of the other chefs in the network for a visit each year. There will also be a total of 12 celebrity chefs in the initial rollout of ShaSha, so you can see the scalability of the project. ShaSha Lounge is a truly brilliant concept developed by The Door in partnership with Nina Compton and her management team, aligned with The Door’s professional expertise in marketing culinary destinations and Dolphin’s family’s passion for charitable giving. Nina’s pledge that a portion of membership in lounge sales will go to support future disaster relief in New Orleans is a gracious and forward-thinking win-win. And honestly, to give Nina her due, she started the creative development of what became ShaSha. Being a native Miamian, she knows what it’s like to get hit hard by hurricanes. So, I want to give a special shout out to Nina Compton on this earnings call. Thank you for joining us on this ride, and to walk through the financials, I’ll now turn it over to Mirta Negrini, our CFO.

Thank you, Bill, and good afternoon, everyone. I will now discuss results for the quarter ended September 30, 2022. Revenues for the quarter were approximately $9.9 million, as compared to approximately $9.4 million for the quarter ended September 30, 2021. Overall, operating expenses for the quarter ended September 30, 2022 were approximately $11 million, compared to approximately $10.5 million in the same period of the prior year. Operating expenses are composed of direct costs, payroll and benefits, selling, general and administrative costs (SG&A), acquisition costs, depreciation and amortization, and legal and professional fees and changes in the fair value of contingent consideration. Direct costs decreased by approximately $200,000 to approximately $837,000. The decrease was primarily attributable to the decline in Viewpoint’s revenue compared to the same period in the prior year. Viewpoint incurred third-party costs related to the productions of marketing materials, which are included in direct costs. Payroll and benefit expenses increased by approximately $1.2 million to approximately $7 million, primarily due to additional headcount in 2022 to support the growth of our business and stock compensation issued to our employees under the 2017 plan. SG&A costs were approximately the same during the three months ended September 30, 2022 compared to the same period in the prior year. Acquisition costs of approximately $300,000 were primarily legal and professional fees related to the Socialyte deal. There were no acquisition costs during the same period in the prior year. Legal and professional fees increased by approximately $300,000 to approximately $800,000. The increase is primarily due to legal and auditor fees associated with the Lincoln Park agreement and the filing of the S-1, and consulting fees for the implementation of a new enterprise resource planning system. These are all one-time costs. Operating loss for the quarter ended September 30, 2022, of $1.1 million includes non-cash items from depreciation and amortization of $415,836, a gain in the change of fair value of contingent consideration of $5,000, compared to an operating loss of $1.1 million for the quarter ended September 30, 2021, which included non-cash items from depreciation and amortization of $475,207 and a loss in the change of fair value of contingent consideration of $1.1 million. Net loss of approximately $1.3 million, or $0.14 per share based on 966,468 weighted average shares outstanding for basic loss per share and $0.14 per share based on 979,371 weighted average shares on a fully diluted loss per share basis for the three months ended September 30, 2022. The net loss of $1.3 million includes non-cash items from depreciation and amortization of $415,836, a gain in the change of fair value of contingent consideration of $5,000, a gain in the change of fair value of warrants and convertible notes of $55,642, and a loss on the equity investment of unconsolidated affiliates of approximately $100,000. Net income was $141,651, or $0.02 per share based on 740,085 weighted average shares outstanding for both basic and diluted earnings per share for the three months ended September 30, 2021. Net income for the quarter ended September 30, 2021 of 141,651 includes non-cash items from depreciation and amortization of $475,207, a loss in the change of fair value of contingent consideration of $1.1 million, a loss in the change of fair value of warrants and convertible notes of $278,923, and a net gain of $1.7 million for the extinguishment of debt. That concludes my financial remarks. I will now ask the operator to open the phone line for Q&A.

First, we will go to James Carbonara with our investor relations.

Thank you operator and hi, Bill. Allen Klee of Maxim Group emailed in four questions. The first one is, what is your plan on NFTs, given all that’s happening with FTX current prices and volumes?

Sure. This is unusual. I’ll pertain to you Allen and James. I would say what’s our plan, yeah. We need to evaluate it, to be quite honest. The crypto space is obviously in quite a bit of turmoil right now. We’ve weathered and pushed the launch of Creature Chronicles to out passed what was socially the crypto winter of the spring and summer. We had a very successful launch. I don’t know where crypto is going from here and we need to just take it day by day without making any hard promises one way or the other. As I mentioned, Allen, you may not have heard because of your emailing these questions, but as I mentioned in my prepared remarks, we don’t have any exposure on the FTX side, and we’ll see what it all means as we go forward and live it day by day. We believe we have expertise and can market in that space, and it’s proven by Creature Chronicles, proven by the hard work the team does for a variety of clients every day, but I don’t know that we can commit today to knowing what the future holds.

Great. And then, his next one, which I think you may have already addressed, was please provide an update on the Night Theatre and Hidden Leaf.

Yeah, I mean, we have told on the prepared remarks, the theater is gorgeous, the restaurant is gorgeous. Theatre is unique. Those walls that are interactive and high fidelity projection allow for some really cool experiences and we knew – I was educated on the process – during the process about how popular the space would be for private events. The team believed that from the beginning. Brookfield was very complementary of its concepts for private events during the construction phase, and it seems to be prudent through these first few weeks. As I mentioned, some of the names I mean, not only the big book, the theatre for private events without even being fully open; I think to a sponsor of those private events they all want to come back for more. So, it’s a really nice environment and brand-new space. It gives us the private events are light glowing for any venue, and it’s by definition the only dual private event that’s going to bring you any more revenue and profits in the programming.

Great. And then, as third of his four questions is, any other changes in 2.0 initiatives?

Well, he probably would have liked the comments about ShaSha. I know there are some of our folks probably listening to this call would really like the ShaSha model, and so do we. It’s not just the ShaSha itself model we are talking about in the prepared remarks, but we feel like having access to the super grid only bolstered by Socialyte right now gives us an opportunity to participate in the revenues or profits of the clients or in equity of the clients. So, we’ve done a couple of those deals in the past; ShaSha is one that combines that concept of being a client. We can market ShaSha and get paid to market ShaSha, but we also have a meaningful ownership percentage in it to invest us to help make ShaSha in New Orleans more of a success and hope demanded nationally. So, that’s a very good deal for both sides, and we feel very good about that.

Great. And then, Allen’s last question any commentary related to outlook?

Yeah, sure. Let’s see. Well, I mean, obviously, whatever I would have said before Socialyte, would change with Socialyte, right? It’s been, by the way, it’s a bit fun in commentary. I was thinking about just how to convey it in brief comments, the growth of the influencer marketing industry to those who may not be as familiar with it. I went back, and I remember when Dolphin was producing shows in Nickelodeon. We were starting to dabble with online content. This is before Netflix launched their screening series back in about 2008. We had a class on the air. I remember having the first conversations with digital groups at CAA and others, and grant in the app social media budget by the loan departments, and then Facebook, I think Facebook went public in 2006; I think that’s about right. I looked up from 2008 when we were playing the beginning slates of the original series for AOL and Facebook, called The MI. This is a great journey question. What was the average time an American spent on social media in 2008? Two years after Facebook went public, it was eight minutes a day and then last year, it was 2 hours and 24 minutes a day, on average. So, it’s not a surprise that brands followed eyeballs. The average American, as you get younger, even more so, 2 hours and 24 minutes a day is what I read online yesterday just to get that stat. Now it’s like a while. So, Socialyte will change things, but it’s obviously on both revenue and profit. As I look back at Q3, am I happy with our revenue growth? I think that had Creature Chronicles gone in Q3 instead of Q4, we would have had a double-digit revenue growth story again year-over-year. We are still on pace for $40 million of revenue this year without Socialyte. I do think that Q3 would look different if we didn’t have the non-cash charges and the non-recurring expenses and the acquisition costs and the professional and legal fees. Our run rate for professional and legal fees should be in the 3.50 million range. It was a little elevated last year’s Q3; we filed the baby show, which obviously we never do without registration. If you took away those one-time expenses of the professional and legal fees that are both normal in the transaction costs, and the non-cash depreciation, we would have probably made a small profit. It would have been a bigger profit, around $0.5 million, which I would have been happier with had Creature Chronicles launched two days earlier. I think our outlook says the same. We are happy about how Q4 is shaping up, what our revenue is going to be, and then obviously next year our profits will increase, and revenues will significantly increase.

Thank you, Bill. That concludes the questions received from Allen Klee of Maxim Group. I’ll hand it back to the operator. Operator?

Thank you. And at this time, this will conclude our Q&A session. I’ll turn it back to management if there are any additional or closing remarks.

Man, I missed both Allen’s voice and another question. Well, thank you. Thank you for listening, and obviously a very exciting day. I don’t want to bury the lead by saying I’m more thrilled to add Socialyte to the Dolphin family. The management team, as I quickly alluded to in the prepared remarks, is outstanding. CEO Sarah Boyd is very, very impressive and a great leader, same with Roy Peters at Los Angeles. I really enjoy getting to know them. I have a lot of respect for all the family market, very kind people and I know they are going to be allied with Dolphin for years to come and significant shareholders in Dolphin. So, it’s an exciting time for Dolphin and I really am very, very happy with this transaction heading into the holiday season. As anyone knows, this is the prime cheese in influencer marketing. I believe that happy profits can come in the fourth quarter. So, I hope we all have a holiday season and if I don’t talk to everyone on the call before then, our best to you and yours. I look forward to the next time we get an opportunity to speak. Thank you, everybody.

Thank you. This concludes today’s call. We thank you for your participation. You may disconnect at any time.