Greetings, and welcome to the Dolphin Entertainment Second Quarter 2020 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Carbonara. Thank you. Mr. Carbonara, you may begin.

Thank you, and once again, welcome to Dolphin Entertainment second quarter 2020 earnings call. With me on the call are Bill O'Dowd, Chief Executive Officer; and Mirta Negrini, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed quarterly reports on Form 10-Q as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements including in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. Now, I’ll 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 today. What a day, right? As many of you may have just read a few minutes ago, we announced our latest acquisition, the influencer marketing firm Be Social. So I'm going to start by talking about this exciting news before proceeding in the usual order of highlighting some top level financial results, and then providing some operational updates before turning it over to Mirta to dive deeper into our financial results. And of course, we'll take questions at the end. Okay, so let's start with Be Social. We love this company and bringing social media influencer marketing into our Super Group was the single biggest priority for Dolphin Entertainment this year. Let me just go off script for a minute. All right, I'll scare James here for a hot second. Sometimes it's just easier to speak in plain English, right? Okay, here go. We're in the business of creating and executing the very best in entertainment, PR and marketing campaigns. The basic principles of PR campaigns have never changed in silent movies. You are building awareness and the ever elusive buzz or hype among consumers for a piece of content. Now, within our companies, that piece of content or products may be the next James Bond movie, or the next HBO hit series, but the basic principle of what you're trying to do hasn't changed for 100 years. What has changed is the where. Where are you marketing? Where are you executing your PR campaign? Well, news flash, right, this is 2020, and where you are marketing is increasingly online. In today's world, PR campaigns are won or lost online, buzz and hype are created through social media and word of mouth is spread on Instagram, not at the office water cooler. And…

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

[Operator Instructions] Our first question comes from Jack Vander Aarde with Maxim Group. Please proceed with your question.

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

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

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

Sure. Well, let me go back to what we said a little bit on Q1, because Be Social is a great example of, when you start adding companies to a Super Group like this, that all want to work or cross sell their services, you grow exponentially. And think about the math of that for a second, like when you're one company, you can't -- you have no one else to cross sell with. And when you're two companies, there's only one line, one road to go right between those two companies. When you start getting the five companies now Be Social can work with all four of the others. So you've gone from one connection to three connections to six connections to now ten connections. And this particular connection is the most desired skill set of all three of our PR firms. There is no way that every single client of the Door utilizes and wants to run social influencer marketing campaigns. Period, full stop. It's one-o-one in restaurants, hotels, consumer products. So if I were to start somewhere I'd start with the Door. But as I was trying to mention on the call, music today -- it's hard to believe how rapidly TikTok has grown right? It's all effectively within the last 12 months and it's a major driver of music marketing campaigns. Same with -- do I need to start talking about music videos on YouTube. I don't know how you market music effectively without 95% of your efforts being online. So it's going to have tremendous advantages with Shore Fire, which has already started a division dedicated to PR for influencers. So Shore Fire has been at the lead of that evolution already and this is only going to enhance it. And then of course with 42West, I mean these influencers are -- many of them are celebrities in their own right, in their world they are. So the cross selling and the synergies are there today, but you asked a future question and I appreciate you asking that Jack, because think of it this way. I don't know that Be Social isn't the hub for another subset of acquisitions, because when you start talking about influencers, Be Social is predominantly focused on where influencers are today. That's beauty, that's fashion that's a lifestyle, wellness, typically speaking. But there's an entire subset out there around video gaming, e-sports other verticals where online influencers are the most effective way to reach certain demographics. I mean, try finding a 19 year old boy watching TV today, that isn't called live sports. So, we think that adding Be Social isn't just immediately beneficial to all three of our PR firms and vice versa, it's a company that will allow us to significantly expand online and immediately. We're looking at opportunities today. So that's also why Be Social was highly strategic for us.

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

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

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

Thank you, Jack.

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

Good afternoon. Can we start with 42West? I'm trying to understand with on the one hand you have the benefit of a lot of content coming out, but then also there might be some challenges coming up of getting of production, or maybe not for the big -- for your customer. So, how do we think about the best way of like how this is going to -- like on a sequential basis. Is this a segment that you think will be kind of growing over the next few quarters or something else?

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

So if we could follow-up on that in terms of, could you just give us a little color for the large studios and streaming sites of where you see they are in terms of starting a backup production? And then for yourself, you gave an interesting -- for independents I'd like to understand a little more you talked about it opening up in some other countries and then how that could -- how you think about when that can happen in the U.S.? Or does it matter if it's the U.S., because your companies can produce out -- can make the movies outside of the U.S.?

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

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

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

Okay, thank you so much. Congratulations.

Sure. Thank you.

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

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

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