DLPN Dolphin Entertainment Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1) 

Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 15, 2024

DOLPHIN ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

Florida	001-38331	86-0787790
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

 

150 Alhambra Circle, Suite 1200, Coral Gables, Florida 33134
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (305) 774 -0407

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

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

  

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ☐

If an emerging growth company, indicate by check mark 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. ☐

 

INTRODUCTORY NOTE

 

On July 15, 2024 (the “Closing Date”), Dolphin Entertainment, Inc., a Florida corporation (the “Company”), acquired all of the issued and outstanding membership interests of Elle Communications, LLC, a California limited liability company (“Elle”), pursuant to a membership interest purchase agreement dated the Closing Date, by and among the Company and the seller signatory thereto (the “Acquisition”). Elle is a California based communications agency.

 

This Current Report on Form 8-K/A amends the Current Report on Form 8-K the Company filed on July 19, 2024, to include Elle audited financial statements as of and for the years ended December 31, 2023, the unaudited financial statements as of and for the six months ended June 30, 2024 and the unaudited pro forma combined financial information related to the Acquisition required by Items 9.01(a) and 9.01(b) of Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial statements of businesses or funds acquired.

 

The audited balance sheet of Elle as of December 31, 2023 and the related statement of income, statement of member’s equity and statement of cash flow for the year ended December 31, 2023, together with the accompanying notes thereto and the unaudited financial statements of Elle as of and for the six month period ended June 30, 2024 are filed as Exhibit 99.1 hereto and are incorporated herein by reference.

 

(b) Pro forma financial information.

 

The unaudited pro forma condensed combined financial information of the Company, including the condensed combined balance sheet as of June 30, 2024, statement of operations for the six months ended June 30, 2024 and statement of operations for the period ending December 31, 2023 are filed as Exhibit 99.2 and are incorporated herein by reference. The unaudited pro forma condensed combined financial information was prepared giving effect to the Acquisition as if it had occurred on January 1, 2023. This unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the Company's actual results of operations or financial position would have been if the Acquisition had occurred on the dates indicated, nor are they necessarily indicative of the Company's future operating results or financial position.

 

(d) Exhibits. The following exhibits are filed as part of this report.

 

Exhibit No.		Description
23.1		Consent of Grant Thornton, LLP
99.1		Historical Financial Information of Elle Communications, LLC
99.2		Unaudited Pro Forma Condensed Combined Financial Information of Dolphin Entertainment, Inc.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

				DOLPHIN ENTERTAINMENT, INC.
Date: September 27, 2024				By:		/s/ Mirta A. Negrini
						Mirta A. Negrini
						Chief Financial and Operating Officer

 

 

 

 

Exhibit 23.1

 

 

 

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 

 

We have issued our report dated September 27, 2024, with respect to the financial statements of Elle Communications, LLC included in the Current Report of Dolphin Entertainment, Inc. on Form 8-K/A filed on September 27, 2024. We consent to the incorporation by reference of said report in the Registration Statements of Dolphin Entertainment, Inc. on Form S-8 (File No. 333-219770), on Form S-1 (File No. 333-267336) and on Form S-3 (File No. 333-273431).

 

/s/ Grant Thornton, LLP

 

Fort Lauderdale, Florida

September 27, 2024

 

 

Exhibit 99.1

 

  

INDEX TO FINANCIAL STATEMENTS

ELLE COMMUNICATIONS, LLC

AUDITED FINANCIAL STATEMENTS

 

	Page
Report of Independent Certified Public Accountants	1
Balance Sheet as of December 31, 2023	3
Statement of Income for the Year Ended December 31, 2023	4
Statement of Cash Flows for the Year Ended December 31, 2023	5
Statement of changes in Member's Equity for the Year Ended December 31, 2023	6
Notes to the Financial Statements	7

 

 

 

grant thornton llp

1301 International Parkway, Suite 300

Fort Lauderdale, FL 33323

 

D       +1 954 768 9900

F       +1 954 768 9908

 

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

  

 

Board of Directors
Elle Communications, LLC

 

Opinion

 

We have audited the financial statements of Elle Communications, LLC (a California limited liability company) (the “Company”), which comprise the balance sheet as of December 31, 2023, and the related statements of income, changes in member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for opinion

 

We conducted our audit of the financial statements in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Responsibilities of management for the financial statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are available to be issued.

 

 

GT.COM		Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership.

 

 

 

 

Auditor’s responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with US GAAS, we:

 

·

Exercise professional judgment and maintain professional skepticism throughout the audit.

·

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

·

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

·

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

·

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

GRANT THORNTON LLP

/s/ GRANT THONRTON LLP

Fort Lauderdale, Florida
September 27, 2024

 

 

 

ELLE COMMUNICATIONS, LLC

BALANCE SHEET

AS OF DECEMBER 31, 2023

		2023
ASSETS
Current assets
Cash and cash equivalents		$	740,207
Accounts receivable (net of allowance for credit losses of nil)			283,082
Total current assets			1,023,289
Total assets		$	1,023,289
LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable		$	34,244
Accrued expenses			8,752
Total current liabilities			42,996
Total liabilities			42,996
MEMBER’S EQUITY
Member’s equity			980,293
Total liabilities and member’s equity		$	1,023,289

 

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

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2023

		2022
REVENUES		$	3,321,108
OPERATING COSTS AND EXPENSES:
Cost of revenues			1,846,373
Office and general expenses			772,286
Operating income			702,449
OTHER INCOME:
Interest income			8,031
Total other income			8,031
Income before provision for income taxes			710,480
Income tax expense			65,153
Net income		$	645,327

 

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

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2023

		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	645,327
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization			1,116
Bad debt expense			60,926
Changes in operating assets and liabilities:
Accounts receivable			(32,683	)
Accounts payable			22,851
Accrued expenses			(28,122	)
Net cash provided by operating activities			669,415
CASH FLOWS FROM FINANCING ACTIVITIES
Member’s distribution			(686,460	)
Net cash used in financing activities			(686,460	)
Net decrease in cash and cash equivalents			(17,045	)
Cash, beginning of the year			757,252
Cash, end of the year		$	740,207
SUPPLEMENTAL DISCLOSURE OF:
CASH FLOWS INFORMATION:
Cash paid for taxes		$	65,153

  

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

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF CHANGES IN MEMBER’S EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2023

 

Member’s equity, beginning of the year		$	1,021,426
Net income			645,327
Member’s distribution			(686,460	)
Member’s equity, end of the year		$	980,293

  

 

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

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2023

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Elle Communications, LLC (the “Company” or “Elle”) was organized, pursuant to the laws of the State of California in August 2008, as a public relations firm specializing in social and environmental impact for a client roster of mission-centered brands, nonprofits and philanthropic foundations, social enterprises, sustainability and ethically made products and activists. The Company is headquartered in California with offices in New York. The Company was acquired by Dolphin Entertainment, Inc. (“Dolphin”), a Florida corporation, on July 15, 2024 and is now a wholly owned subsidiary of Dolphin.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accompanying financial statements for the year ended December 31, 2023, were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the year presented.

Use of Estimates in Financial Statements – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Fair Value – The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis.

Recent Accounting Pronouncements – In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-01, “Compensation—Stock Compensation - Scope Application of Profits Interest and Similar Awards” (“ASU  2024-01”), which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of Accounting Standards Codification Topic 718, “Compensation – Stock Compensation” or another accounting standard. ASU  2024-01 is effective for the Company on January 1, 2026, with early adoption of the amendments permitted. The Company adopted ASU 2024-01 beginning on January 1, 2023.

Cash – The Company maintains an account in a bank. The excess of deposit balances reported by the bank over amounts that would have been covered by federal insurance was approximately $490,207 at December 31, 2023.

Accounts Receivable and Allowance for Credit Losses – The Company’s trade accounts receivable are recorded at amounts billed to customers and presented on the balance sheet net of the allowance for credit losses. The allowance is determined by various factors, including the age of the receivables, current economic conditions, historical losses and other information management obtains regarding the financial condition of customers. The policy for determining the past due status of receivables is based on how recently payments have been received. Receivables are charged off when they are deemed uncollectible.

Depreciation and Amortization – Property, equipment, and leasehold improvements are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. As of December 31, 2023, the Company’s fixed assets have been fully depreciated.

Revenue Recognition – The Company’s revenue is recognized as control of the promised services are transferred to clients, in an amount that reflects the consideration it expects to be entitled to in exchange for those services. See Note 3 for additional information.

Lease Arrangements – The Company determines if an arrangement is or contains a lease at inception and has one lease in New York for six months. The Company has made an accounting policy exception to exempt leases with an initial term of 12 months or less from being recognized on the balance sheet. Payments related to those leases are recognized in the statement of income on a straight-line basis over the lease term. For the year-ended December 31, 2023, the total short-term lease expense was $103,268.

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2023

 

Income Taxes – The Company operates as a Limited Liability Company (“LLC”) under the statutes of the Limited Liability Company Act of the State of New York. Under those statutes, the Company’s taxable income or loss is distributed to its members, who report their proportionate share of income or loss on their income tax returns. However, the Company is subject to the New York limited liability fee, California State limited liability fee and tax, New York City unincorporated business tax and City of Los Angles business tax. Current tax expense includes New York State limited liability fee, California State limited liability fee, California State limited liability tax, New York unincorporated business tax and City of Los Angeles business tax. Current tax expense is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

The Company takes a two-step approach to recognizing and measuring tax positions taken or to be taken in the Company’s income tax returns. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being recognized upon settlement.

Interest and penalties resulting from uncertain tax positions are classified in the financial statements as provision for income taxes.

Advertising Costs – Advertising costs, which are included in operating expenses, are charged to expense as incurred. There were no costs incurred for the year ended December 31, 2023 as it relates to advertising costs.

Employment Agreements – The Company has entered into employment agreements with certain employees of the Company. The agreements provide for minimum levels of base compensation plus an annual bonus tied to individual and/or Company performance. These amounts are included in operating expenses in the accompanying statement of income.

Retirement Costs – The Company offers employees access to a defined contribution retirement plan. Under the defined contribution plan, the Company may make annual contributions to the participants’ accounts which are subject to vesting. The Company’s contribution expense pursuant to this plan was $40,432 for the year ended December 31, 2023, and is recorded in office and general expenses in the accompanying statement of income.

NOTE 3 – REVENUE

The Company derives revenues from providing public relations services to clients. The Company’s arrangements are in the form of fees for services performed depending on the terms of the contract. In all circumstances, revenue is recognized when its customers obtain control of the promised services, in an amount that reflects the consideration to which it expects to receive an exchange for those services. Payment terms are generally less than 30 days.

To determine recognition, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contracts; and (v) recognize revenue as or when it satisfies the performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are distinct performance obligations. The Company typically does not capitalize costs to obtain a contract as these amounts would generally be recognized over a period of one year or less.

The Company renders services to clients for a fixed monthly fee. The services provided by the Company are considered a single performance obligation that is simultaneously consumed by clients as they are being rendered by the Company. Because the Company’s agreements with its clients provide for monthly service at a fixed fee, and each contract may be terminated with a 60 or 90- day notice by either party with no termination penalty, the Company recognizes revenue over time as the monthly service are performed. Direct costs are reimbursed by clients are billed as pass-through revenue with no mark-up.

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2023

NOTE 4 – INCOME TAXES

The provision of income tax is comprised of state income taxes of $65,153 for the year ended December 31, 2023.

NOTE 5 – FAIR VALUE MEASUREMENTS

A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous for the asset or liability.

In determining fair value, the Company utilizes valuation techniques that maximize the use of the observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in the assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below:

Level 1 – Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 – Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3 – Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 At December 31, 2023, the carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximated fair value because of their short-term maturity.

 NOTE 6 – CONCENTRATIONS

As of December 31, 2023, four vendors represented approximately 44%, 22%, 15% and 13% of the accounts payable respectively. For the year ended December 31, 2023, there were no customers accounted for more than 10% of revenues. As of December 31, 2023, four customers represented 16%, 15%, 15% and 13%, respectively, of accounts receivable.

NOTE 7 – SUBSEQUENT EVENTS

On July 15, 2024, Dolphin, acquired all of the issued and outstanding membership interests of the Company, pursuant to a membership interest purchase agreement (the “Agreement”) and the Company became a wholly owned subsidiary of Dolphin on this date.

The consideration paid by Dolphin in connection with the acquisition of the Company was $1,863,000 in cash and 1,922,600 shares of common stock of Dolphin, par value of $0.015, issued to the member of the Company. The consideration amount is subject to adjustment based on post-closing cash consideration adjustments. The Agreement provides for additional consideration of $450,000 in cash on March 31, 2025, which is subject to adjustment, to be paid to the selling member of the Company based on the Company’s revenue for the year ended December 31, 2024.

The Company evaluated its December 31, 2023, financial statements for subsequent events through September 26, 2024, the date the financial statements were available to be issued, and is not aware of any subsequent events which would require recognition or disclosure in the financial statements other than those disclosed.

 

 

 

INDEX TO FINANCIAL STATEMENTS

 

ELLE COMMUNICATIONS, LLC

 

 

	Page
Balance Sheet as of June 30, 2024	1
Statement of Income for the Six Months Ended June 30, 2024	2
Statement of Cash Flows for the Six Months Ended June 30, 2024	3
Statement of Changes in Member’s Equity for the Six Months Ended June 30, 2024	4
Notes to the Financial Statements	5

 

 i

 

ELLE COMMUNICATIONS, LLC

BALANCE SHEET

AS OF JUNE 30, 2024

(Unaudited)

ASSETS		2024
Current assets
Cash and cash equivalents		$	676,223
Accounts receivable (net of allowance of credit losses of nil)			357,570
Total current assets			1,033,793
Total assets		$	1,033,793
LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable		$	4,483
Accrued expenses			69,339
Total current liabilities			73,822
Total liabilities			73,822
MEMBER’S EQUITY
Member’s equity			959,971
Total liabilities and member’s equity		$	1,033,793

 

 

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

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2024

(Unaudited)

		2024
REVENUES		$	1,716,170
OPERATING COST AND EXPENSES:
Cost of revenues			951,098
Office and general expenses			522,211
Operating Income			242,861
OTHER INCOME:
Interest income			4,850
Total other income			4,850
Income before provision for income taxes			247,711
Income tax expense			52,623
Net income		$	195,088

  

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

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2024

(Unaudited)

		2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	195,088
Adjustments to reconcile net income to net cash
provided by operating activities
Bad debt expense			1,926
Changes in operating assets and liabilities:
Accounts receivable			(76,414	)
Accounts payable			(29,762	)
Accrued expenses			60,588
Net cash provided by operating activities			151,426
CASH FLOWS FROM FINANCING ACTIVITIES
Member’s distribution			(215,410	)
Net cash used in financing activities			(215,410	)
Net decrease in cash			(63,984	)
Cash, beginning of the period			740,207
Cash, end of the period		$	676,223
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes		$	50,123

 

 

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

 

 

 

ELLE COMMUNICATIONS, LLC

STATEMENT OF CHANGES IN MEMBER’S EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2024

(Unaudited)

 

Member’s equity, beginning of the period		$	980,293
Net income			195,088
Member’s distribution			(215,410	)
Member’s equity, end of the period		$	959,971

 

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

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Elle Communications, LLC (the “Company” or “Elle”) was organized, pursuant to the laws of the State of California in August 2008, as a public relations firm specializing in social and environmental impact for a client roster of mission-centered brands, nonprofits and philanthropic foundations, social enterprises, sustainability and ethically made products and activists. The Company is headquartered in California with offices in New York. The Company was acquired by Dolphin Entertainment, Inc. (“Dolphin”), a Florida corporation, on July 15, 2024 and is now a wholly owned subsidiary of Dolphin.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accompanying financial statements for the six months ended June 30, 2024, were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the six months presented.

Use of Estimates in Financial Statements – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Fair Value – The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis.

Cash – The Company maintains an account in a bank. The excess of deposit balances reported by the bank over amounts that would have been covered by federal insurance was approximately $426,223 at June 30, 2024.

Accounts Receivable and Allowance for Credit Losses – The Company’s trade accounts receivable are recorded at amounts billed to customers and presented on the balance sheet net of the allowance for credit losses. The allowance is determined by various factors, including the age of the receivables, current economic conditions, historical losses and other information management obtains regarding the financial condition of customers. The policy for determining the past due status of receivables is based on how recently payments have been received. Receivables are charged off when they are deemed uncollectible.

Depreciation and Amortization – Property, equipment, and leasehold improvements are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. As of June 30, 2024, the Company’s fixed assets have been fully depreciated.

Revenue Recognition – The Company’s revenue is recognized as control of the promised services are transferred to clients, in an amount that reflects the consideration it expects to be entitled to in exchange for those services. See Note 3 for additional information.

Lease Arrangements – The Company determines if an arrangement is or contains a lease at inception and has one lease in New York for six months. The Company has made an accounting policy exception to exempt leases with an initial term of 12 months or less from being recognized on the balance sheet. Payments related to those leases are recognized in the statement of income on a straight-line basis over the lease term. For the year-ended June 30, 2024, the total short-term lease expense was $53,328.

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Income Taxes – The Company operates as a Limited Liability Company (“LLC”) under the statutes of the Limited Liability Company Act of the State of New York. Under those statutes, the Company’s taxable income or loss is distributed to its members, who report their proportionate share of income or loss on their income tax returns. However, the Company is subject to the New York limited liability fee, California State limited liability fee and tax, New York City unincorporated business tax and City of Los Angles business tax. Current tax expense includes New York State limited liability fee, California State limited liability fee, California State limited liability tax, New York unincorporated business tax and City of Los Angeles business tax. Current tax expense is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

The Company takes a two-step approach to recognizing and measuring tax positions taken or to be taken in the Company’s income tax returns. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being recognized upon settlement.

Interest and penalties resulting from uncertain tax positions are classified in the financial statements as provision for income taxes.

Advertising Costs – Advertising costs, which are included in operating expenses, are charged to expense as incurred. The Company’s advertising costs was $13,537 for the six months ended June 30, 2024.

Employment Agreements – The Company has entered into employment agreements with certain employees of the Company. The agreements provide for minimum levels of base compensation plus an annual bonus tied to individual and/or Company performance. These amounts are included in operating expenses in the accompanying statement of income.

Retirement Costs – The Company offers employees access to a defined contribution retirement plan. Under the defined contribution plan, the Company may make annual contributions to the participants’ accounts which are subject to vesting. The Company’s contribution expense pursuant to this plan was $25,750 for the six months ended June 30, 2024 and is recorded in office and general expenses in the accompanying statement of income.

NOTE 3 – REVENUE

The Company derives revenues from providing public relations services to clients. The Company’s arrangements are in the form of fees for services performed depending on the terms of the contract. In all circumstances, revenue is recognized when its customers obtain control of the promised services, in an amount that reflects the consideration to which it expects to receive an exchange for those services. Payment terms are generally less than 30 days.

To determine recognition, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contracts; and (v) recognize revenue as or when it satisfies the performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are distinct performance obligations. The Company typically does not capitalize costs to obtain a contract as these amounts would generally be recognized over a period of one year or less.

The Company renders services to clients for a fixed monthly fee. The services provided by the Company are considered a single performance obligation that is simultaneously consumed by clients as they are being rendered by the Company Because the Company’s agreements with its clients provide for monthly service at a fixed fee, and each contract may be terminated with a 60 or 90- day notice by either party with no termination penalty, the Company recognizes revenue over time as the monthly service are performed. Direct costs are reimbursed by clients are billed as pass-through revenue with no mark-up.

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

 

NOTE 4 – INCOME TAXES

The provision of income tax is comprised of state income taxes of $52,623 for the six months ended June 30, 2024.

NOTE 5 – FAIR VALUE MEASUREMENTS

A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous for the asset or liability.

In determining fair value, the Company utilizes valuation techniques that maximize the use of the observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in the assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below:

Level 1 – Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 – Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3 – Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

At June 30, 2024, the carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximated fair value because of their short-term maturity.

NOTE 6 – CONCENTRATIONS

As of June 30, 2024, two vendors represented approximately 56% and 25% of the accounts payable respectively. For the six Months ended June 30, 2024, there was one customer accounted for 10% of revenues. As of June 30, 2024, two customers represented 39% and 30%, respectively, of accounts receivable.

 

 

ELLE COMMUNICATIONS, LLC

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

NOTE 7 – SUBSEQUENT EVENTS

On July 15, 2024, Dolphin, acquired all of the issued and outstanding membership interests of the Company, pursuant to a membership interest purchase agreement (the “Agreement”) and the Company became a wholly owned subsidiary of Dolphin on this date.

The consideration paid by Dolphin in connection with the acquisition of the Company was $1,863,000 in cash and 1,922,600 shares of common stock of Dolphin, par value of $0.015, issued to the member of the Company. The consideration amount is subject to adjustment based on post-closing cash consideration adjustments. The Agreement provides for additional consideration of $450,000 in cash on March 31, 2025, which is subject to adjustment, to be paid to the selling member of the Company based on the Company’s revenue for the year ended December 31, 2024.

The Company evaluated its June 30, 2024, financial statements for subsequent events through September 26, 2024, the date the financial statements were available to be issued, and is not aware of any subsequent events which would require recognition or disclosure in the financial statements other than those disclosed.

 

 

Exhibit 99.2

 

 

 

DOLPHIN ENTERTAINMENT, INC

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of Dolphin Entertainment, Inc. and its wholly owned subsidiaries (hereinafter referred to as “Dolphin” or “the Company”) and Elle Communications, LLC (“Elle”) after giving effect to Dolphin’s acquisition of Elle that was completed on July 15, 2024 (the “Closing Date”). The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2024 is presented as if the acquisition of Elle had occurred on June 30, 2024. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 and the six months ended June 30, 2024 are presented as if the acquisition had occurred on January 1, 2023. The unaudited condensed combined statement of operations for the year ended December 31, 2023 includes the information for Special Projects Media LLC (“Special Projects”) for the period between January 1, 2023 and October 1, 2023, the period prior its acquisition by Dolphin on October 2, 2023. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to reflect certain reclassifications to conform with current financial statement presentation.

 

The determination and preliminary allocation of the purchase consideration used in the unaudited pro forma condensed combined financial information are based upon preliminary estimates, which are subject to change during the measurement period (up to one year from the Closing Date). Accordingly, the aggregate value of the consideration paid by Dolphin to complete the acquisition was allocated to the assets acquired and liabilities assumed from Elle based upon estimated fair values on the Closing Date. Dolphin has not completed the detailed valuations necessary to estimate the fair value of the assets acquired and the liabilities assumed from Elle and the related allocations of purchase price, nor has Dolphin identified all adjustments necessary to conform Elle’s accounting policies to Dolphin’s accounting policies. Accordingly, the pro forma purchase price adjustments presented herein are preliminary, and may not reflect any final purchase price adjustments made. Dolphin estimated the fair value of Elle’s assets and liabilities based on discussion with Elle’s management, due diligence and preliminary work performed by third-party valuation specialists. As the final valuations are being performed, adjustments to the fair value of relevant balance sheet amounts may result in material differences from the information presented herein.

 

The unaudited pro forma adjustments are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been consummated as of the dates indicated or that may be achieved in the future. The actual results reported by the combined company in periods following the acquisition may differ significantly from those reflected in these unaudited pro forma condensed combined financial information for a number of reasons, including cost saving synergies from operating efficiencies and the effect of incremental costs incurred to integrate the two companies.

 

Dolphin will finalize the acquisition accounting as soon as practicable within the required measurement period prescribed by Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), but in no event later than one year following the Closing Date. The unaudited pro forma condensed combined financial information has been presented for informational purposes only and should not be relied upon. The unaudited pro forma condensed combined financial information should be read in conjunction with Dolphin’s historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 and quarterly financial statements on Form 10-Q for the six months ended June 30, 2024 and the historical audited financial statements of Elle for the year ended December 31, 2023 and the historical unaudited financial statements of Elle for the six months ended June 30, 2024 contained in this Form 8-K.

 

 

  

Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2024

ASSETS		Dolphin Entertainment, Inc. (Historical)				Elle Communications, LLC (Historical)				Pro Forma Adjustments				Notes				Pro Forma Combined
Current
Cash and cash equivalents		$	8,718,975			$	676,223			$	(1,863,000	)			(a)			$	7,532,198
Restricted cash			1,127,960				—				—								1,127,960
Accounts receivable:
Trade, net			7,707,126				357,570				—								8,064,696
Other receivables			4,469,209				—				—								4,469,209
Notes receivable			1,135,000				—				—								1,135,000
Other current assets			606,964				—				—								606,964
Total current assets			23,765,234				1,033,793				(1,863,000	)							22,936,027
Capitalized production costs, net			538,231				—				—								538,231
Employee receivable			908,085				—				—								908,085
Right-of-use asset			4,638,274				—				—								4,638,274
Goodwill			25,211,206				—				2,857,065				(b)				28,068,271
Intangible assets, net			10,147,970				—				1,280,000				(c)				11,427,970
Property, equipment and leasehold improvements, net			148,630				—				—								148,630
Other long-term assets			216,305				—				—								216,305
Total Assets		$	65,573,935			$	1,033,793			$	2,274,065							$	68,881,793
LIABILITIES
Current
Accounts payable		$	3,196,441			$	4,483			$	—							$	3,200,924
Term loan, current portion			1,023,468				—				—								1,023,468
Line of credit, current portion			400,000				—				—								400,000
Notes payable, current portion			3,900,000				—				—								3,900,000
Contingent consideration			—				—				401,000				(d)				401,000
Accrued interest - related party			1,763,779				—				—								1,763,779
Accrued compensation - related party			2,625,000				—				—								2,625,000
Lease liability, current portion			1,959,835				—				—								1,959,835
Deferred revenue			851,402				—				—								851,402
Other current liabilities			10,290,241				69,339				1,064,244				(e)				11,423,824
Total current liabilities			26,010,166				73,822				1,465,244								27,549,232
Term loan, noncurrent portion			3,979,052				—				—								3,979,052
Notes payable, noncurrent portion			2,980,000				—				—								2,980,000
Convertible notes payable			5,100,000				—				—								5,100,000
Convertible notes payable at fair value			290,000				—				—								290,000
Loan from related party			3,217,873				—				—								3,217,873
Lease liability			3,220,449				—				—								3,220,449
Deferred tax liability			329,510				—				—								329,510
Other noncurrent liabilities			18,915				—				—								18,915
Total Liabilities			45,145,965				73,822				1,465,244								46,685,031
STOCKHOLDERS' EQUITY
Total Stockholders' Equity		$	20,427,970			$	959,971			$	808,821				(f)			$	22,196,762
Total Liabilities and Stockholders' Equity		$	65,573,935			$	1,033,793			$	2,274,065							$	68,881,793

 

 

 See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

Unaudited Pro Forma Condensed Combined Statements of Operations
For the six months ended June 30, 2024

		Dolphin Entertainment, Inc.  (Historical)				Elle Communications, LLC (Historical)				Pro Forma Adjustments				Notes				Pro Forma Combined
Revenues		$	26,684,981			$	1,716,170			$	—							$	28,401,151
Cost of services and operating expenses			27,639,907				1,473,309				137,488				(c)				29,250,704
Loss (income) from operations			(954,926	)			242,861				(137,488	)							(849,553	)
Change in fair value of convertible note			65,000				—				—								65,000
Change in fair value of warrants			5,000				—				—								5,000
Interest income			6,600				4,850				—								11,450
Interest expense			(1,025,821	)			—				—								(1,025,821	)
(Loss) income before income taxes			(1,904,147	)			247,711				(137,488	)							(1,793,924	)
Income tax expense			(47,079	)			(52,623	)			—								(99,702	)
Net (loss) income		$	(1,951,226	)		$	195,088			$	(137,488	)						$	(1,893,626	)
Loss Per Share:
Basic		$	(0.10	)						$	(0.01	)			(i)			$	(0.09	)
Diluted		$	(0.10	)						$	(0.01	)			(i)			$	(0.09	)
Weighted average number of shares used in per share calculation:
Basic			18,962,067																20,874,104
Diluted			19,089,944																21,001,981

 

 See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

 

Unaudited Pro Forma Combined Statements of Operations
For the year ended December 31, 2023

 

		Dolphin Entertainment, Inc. (Historical)				Special Projects Media LLC (1/1/2023 - 10/1/2023)				Elle Communications, LLC (Historical)				Pro Forma Adjustments				Notes		Pro Forma Combined
Revenues		$	43,123,075			$	6,979,272			$	3,321,108			$	(340,610	)		(h)		$	53,082,845
Cost of services and operating expenses			63,233,572				6,106,254				2,618,659				289,885			(c), (h)			72,248,370
(Loss) income from operations			(20,110,497	)			873,018				702,449				(630,495	)					(19,165,525	)
Change in fair value of convertible note			(11,444	)			—				—				—						(11,444	)
Change in fair value of warrants			10,000				—				—				—						10,000
Interest income			2,877				201				8,031				—						11,109
Interest expense			(2,085,107	)			—				—				(31,196	)		(g)			(2,116,303	)
(Loss) income before income taxes			(22,194,171	)			873,219				710,480				(661,691	)					(21,272,163	)
Income tax expense			(53,504	)			(28,693	)			(65,153	)			—						(147,350	)
(Loss) income before equity in losses of unconsolidated affiliates		$	(22,247,675	)		$	844,526			$	645,327			$	(661,691	)				$	(21,419,513	)
Equity in losses of unconsolidated affiliates		$	(2,149,050	)		$	—			$	—				—						(2,149,050	)
Net (loss) income		$	(24,396,725	)		$	844,526			$	645,327			$	(661,691	)				$	(23,568,563	)
Income Per Share:
Basic		$	(1.69	)										$	(0.40	)		(i)		$	(1.29	)
Diluted		$	(1.69	)										$	(0.40	)		(i)		$	(1.29	)
Weighted average number of shares used in per share calculation:
Basic			14,413,154																		18,229,047
Diluted			14,413,154																		18,229,047

 

 

 See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

 

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

 NOTE 1 – DESCRIPTION OF THE TRANSACTION

 

On the Closing Date, Dolphin acquired all of the issued and outstanding membership interests of Elle, pursuant to a membership interest purchase agreement (the “Elle Purchase Agreement”) between Dolphin and Danielle Finck (“Seller”) and Elle became a wholly owned subsidiary of Dolphin.

 

The consideration paid by Dolphin in connection with the acquisition of Elle is approximately $4.8 million, which is subject to adjustments based on a customary post-closing cash consideration adjustment. On the Closing Date, Dolphin paid the Sellers $1.863 million cash and issued the Sellers 1.9 million shares of Dolphin’s common stock. As part of the Elle Purchase Agreement, Dolphin entered into employment agreements with Danielle Finck and Silvia Snow Thomas, each for a period of four years.

  

NOTE 2 –BASIS OF PRO FORMA PRESENTATION

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2024, combines the historical balance sheet of Dolphin with the historical balance sheet of Elle and has been prepared as if the Elle acquisition had occurred on June 30, 2024.  The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 and the six months ended June 30, 2024, combines the historical statement of operations of Dolphin with the historical statement of operations of Elle and was prepared as if the acquisition had occurred on January 1, 2023.  The unaudited condensed combined statement of operations for the year ended December 31, 2023 includes the information for Special Projects for the period between January 1, 2023 and October 1, 2023, the period prior its acquisition by Dolphin on October 2, 2023. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to reflect certain reclassifications to conform with current financial statement presentation.

 

Dolphin accounted for the acquisition in the unaudited pro forma condensed combined financial information using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”).  In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the Closing Date.  Goodwill as of the Closing Date is measured as the excess of purchase consideration over the fair value of the net tangible and identifiable assets acquired.

 

The pro forma adjustments described below were developed based on Dolphin management’s assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Elle based on preliminary estimates to fair value.  The final purchase consideration and allocation of the purchase consideration will differ from that reflected in the unaudited pro forma condensed combined financial information after the final valuation procedures are performed and the amounts are finalized.

 

 The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

 

Dolphin expects to incur costs and realize benefits associated with integrating the operations of Dolphin and Elle.  The unaudited pro forma condensed combined financial statements do not reflect the costs of any integration activities or any benefits that may result from operating efficiencies or revenue synergies.  The unaudited pro forma condensed combined statement of operations does not reflect any non-recurring charges directly related to the acquisition that the condensed combined companies incurred upon completion of Elle acquisition.

 

 NOTE 3 – ESTIMATED PRELIMINARY PURCHASE PRICE CONSIDERATION

 

 The table below represents the total estimated preliminary purchase price consideration:

 

Closing Common Stock (1,922,600 shares, at a purchase price of $0.92, the July 15, 2024 closing stock price) (See Note 5(e))		$	1,768,792
Cash paid at closing			1,863,000
Due to seller for working capital and cash adjustments			744,970
Contingent Consideration			401,000
Preliminary purchase price consideration		$	4,777,762

 

 

 

 

NOTE 4 – ESTIMATED PRELIMINARY PURCHASE PRICE ALLOCATION

 

The Company has performed a preliminary valuation analysis of the estimated fair market value of Elle’s assets and liabilities that were acquired or assumed by the Company.

 

The following table summarized the allocation of the preliminary purchase price as of the Closing Date:

 

Cash		$	676,223
Accounts receivable			357,570
Intangible assets			1,280,000
Total identifiable assets acquired			2,313,793
Accounts payable			(4,483	)
Other current liabilities			(388,613	)
Total liabilities assumed			(393,096	)
Net identifiable assets acquired			1,920,697
Goodwill			2,857,065
Net assets acquired		$	4,777,762

 

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet as of June 30, 2024 and the statements of operations for the year ended December 31, 2023 and the six months ended June 30, 2024. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (i) changes in allocations to intangible assets such as trade name and customer relationships, as well as goodwill and (ii) other changes to the assets and liabilities. 

 

 

 

 

NOTE 5 – PRO FORMA ADJUSTMENTS

 

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined information:

  

(a)

Represents the $1,863,000 cash paid to the Seller by Dolphin on the Closing Date.

 

(b)

To record $2,857,065 of preliminary goodwill based on the excess of purchase consideration of the acquisition of Elle over the preliminary fair value of the net identifiable assets acquired.  In accordance with ASC 805, goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.  In the event that goodwill has become impaired, we will record an expense for the amount impaired during the fiscal quarter in which the determination is made.

 

	(c)	The addition of intangible assets as a result of the estimated preliminary purchase price allocation is comprised of the following:

 

Elle		Closing Date Opening Balance				Estimated Useful Live (Years)				Annual Amortization				Quarterly Amortization
Intangible assets:
Customer relationships		$	1,080,000				7				Note (1)
Trade name			200,000				5				40,000				10,000
Total intangible assets		$	1,280,000

 

Note (1) - The Company amortizes customer relationships using an accelerated method in which a greater percentage of the customer relationship asset is amortized in the early years of the asset’s useful life as the ability to generate revenue from this asset is greater in the beginning years.

 

The amortization expense related to the Elle intangible assets acquired presented in these unaudited pro forma financial statements for the year ended December 31, 2023 and the six months ended June 30, 2024, is $320,512 and $137,488, respectively. For the unaudited pro forma statement of operations for the year ended December 31, 2023, the Company included amortization expense of $309,984 related to the amortization of the intangible assets of Special Projects for the period between January 1, 2023 and October 1, 2023. The amortization expense for the period between October 2, 2023 and December 31, 2023 is included in the historical statement of operations of the Company.

 

	(d)	The Seller has the right to earn up to an additional $450,000 consideration (the “Contingent Consideration”) for the Elle acquisition, contingent on achieving certain financial targets in 2024, as specified in the Elle Purchase Agreement. The Contingent Consideration is payable in cash and the Company calculated a preliminary fair value for the Contingent Consideration of $401,000. The Company utilized a Monte Carlo Simulation model to estimate the fair value of the Contingent Consideration, 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.
	(e)	Represents the adjustment for the preliminary calculation of working capital in the amount of $283,747 and cash adjustment of $461,223 due to the Sellers per the Elle Purchase Agreement. The Company also assumed a liability in the amount of $319,274 due to one of Elle’s employees.

 

(f)

Adjustments to shareholders equity are as follows:

 

Common Stock, par value of 1,922,600 shares issued on the Closing Date		$	28,839
Additional paid in capital of Common Stock issued on the Closing Date			1,739,953
Total fair value of the equity of the Elle acquisition			1,768,792
Historical member equity of Elle			(959,971	)
Adjustment to shareholders’ equity		$	808,821

 

 

 

 

(g)

On September 29, 2023, Dolphin, through its subsidiaries, 42West, LLC, Be Social Marketing Group, LLC and Socialyte LLC, as co-borrowers, (the “Co-Borrowers”) entered into a five-year term loan with BankUnited, N.A. (“BankUnited Loan Agreement”). The BankUnited Loan Agreement includes: (i) $5,800,000 secured term loan (“BKU Term Loan”), (ii) and $750,000 of a secured revolving line of credit (“BKU Line of Credit”) and (iii) $400,000 Commercial Card (“BKU Commercial Card”). The BKU Term Loan carries a 1.0% origination fee and matures in September 2028, the BKU Line of Credit carries an initial origination fee of 0.5% and an 0.25% fee on each annual anniversary and matures in September 2026; the BKU Commercial Card does not have any initial or annual fee and matures in September 2026. The BKU Term Loan has a declining prepayment penalty equal to 5% in year one, 4% in year two, 3% in year three, 2% in year four and 1% in year five of the outstanding balance. The BKU Line of Credit and BKU Commercial Card can be repaid without any prepayment penalty. For the year ended December 31, 2023, the Company increased interest expense in the amounts of $31,196 for interest expense on the term loan.

 

(h)

During the year ended December 31, 2023, the Company retained the services of Special Projects for a monthly fee of $30,000 plus out of pocket expenses.  An adjustment in the amount of $340,610 was made to revenue and operating expenses to eliminate the transactions between Dolphin and Special Projects.  The $340,610 includes reimbursements for audit costs and travel in the amount of $70,610.

 

(i)

The Company recalculated loss per share as if the acquisition had taken place and shares had been issued on January 1, 2023:

		Year ended December 31, 2023								Six months ended June 30, 2024
		Historical				Pro Forma				Historical				Pro Forma
Numerator
Net loss attributable to Dolphin Entertainment common stock shareholders and numerator for basic loss per share			(24,396,725	)			(23,568,563	)			(1,951,226	)			(1,893,626	)
Change in fair value of convertible notes payable			—				—				(65,000	)			(65,000	)
Interest expense			—				—				19,726				19,726
Numerator for diluted loss per share “LPS”		$	(24,396,725	)		$	(23,568,563	)		$	(1,996,500	)		$	(1,938,900	)
Denominator
Denominator for basic LPS - weighted-average shares			14,413,154				18,229,047				18,962,067				20,874,104
Effect of dilutive securities:
Convertible note payable			—				—				127,877				127,877
Denominator for diluted LPS - adjusted weighted-average shares			14,413,154				18,229,047				19,089,944				21,001,981
Basic loss per share		$	(1.69	)		$	(1.29	)		$	(0.10	)		$	(0.09	)
Diluted loss per share		$	(1.69	)		$	(1.29	)		$	(0.10	)		$	(0.09	)

 

 

v3.24.3

Cover	Jul. 15, 2024
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Amendment Description	This Current Report on Form 8-K/A amends the Current Report on Form 8-K the Company filed on July 19, 2024, to include Elle audited financial statements as of and for the years ended December 31, 2023, the unaudited financial statements as of and for the six months ended June 30, 2024 and the unaudited pro forma combined financial information related to the Acquisition required by Items 9.01(a) and 9.01(b) of Form 8-K.
Document Period End Date	Jul. 15, 2024
Entity File Number	001-38331
Entity Registrant Name	DOLPHIN ENTERTAINMENT, INC.
Entity Central Index Key	0001282224
Entity Tax Identification Number	86-0787790
Entity Incorporation, State or Country Code	FL
Entity Address, Address Line One	150 Alhambra Circle
Entity Address, Address Line Two	Suite 1200
Entity Address, City or Town	Coral Gables
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33134
City Area Code	305
Local Phone Number	774 -0407
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	DLPN
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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