Good afternoon, ladies and gentlemen, and welcome to Dolphin Entertainment Fourth Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.

Thank you. And once again, welcome to Dolphin Entertainment’s fourth quarter and full year 2021 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 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 would like to turn the call over to Bill O’Dowd, Chief Executive Officer of Dolphin Entertainment. Bill, please proceed. Bill O’Dowd: Thanks, James, and hi, everyone. Good afternoon, and thank you for joining us today. As always, we’ll start with a…

Thank you, Bill, and good afternoon, everyone. I will now discuss results for the year ended December 31, 2021. Revenues for the year were approximately $35.7 million as compared to $24 million for the year ended December 31, 2020. Overall operating expenses for the year were approximately $41.2 million compared to approximately $26.7 million in the prior year. Operating expenses are composed of direct costs, payroll and benefits, selling, general and administrative costs, changes in the fair value of contingent consideration, depreciation and amortization and legal and professional fees. Direct costs for the year ended December 31, 2021, were approximately $3.9 million compared to $2.6 million in the prior year. Payroll and benefit costs for the year ended December 31, 2021, were approximately $23.8 million compared to $15.9 million in the prior year. Selling, general and administrative expenses for the year ended December 31, 2021, were approximately $5.8 million compared to $4.8 million in the prior year. Legal and professional fees were approximately $2 million compared to $1.2 million last year. Operating loss was $5.4 million, which included noncash items from depreciation and amortization of approximately $1.9 million and changes in the fair value of contingent consideration of approximately $3.7 million. This compared to an operating loss of approximately $2.6 million in the prior year, which included noncash items from depreciation and amortization of $2 million. Net loss was approximately $6.4 million, which included noncash changes and fair value of liability of approximately $3.1 million and approximately $0.3 million of a gain on extinguishment of debt. This compared to a net loss of approximately $1.9 million, which was positively impacted by non-cash changes in the fair value of liabilities of approximately $0.9 million, a gain in extinguishment of debt of approximately $3.3 million, and a loss of approximately $1.5 million on the deconsolidation of the Max Steel variable interest entity for the year ended December 31, 2020. Basic and fully diluted loss per share was $0.85 per share based on 7,614,774 weighted average shares outstanding. This compares to $0.35 basic loss per share based on 5,619,969 weighted average shares and $0.58 fully diluted loss per share based on 6,382,937 weighted average shares outstanding last year. Cash and cash equivalents as of December 31, 2021, were $7.7 million compared to $7.9 million last year. That concludes my financial remarks. I will now ask the operator to open the phone lines for Q&A. Operator, would you please poll for questions?

Absolutely. Thank you. [Operator Instructions] First question is coming from Allen Klee with Maxim Group. Your line is live.

Yes. Hi. Congrats, good beat on my numbers for the quarter. Good momentum. So, the questions that I have starting off, if I look at what your revenue was for the quarter, how -- was all this revenue from the Super Group’s, or was any of it from the 2.0 so far? Bill O’Dowd: All of it was from the Super Group. We haven’t recognized any 2.0 revenue until this summer.

Got it. Okay. And then, you said -- just in the timing of just to make sure I got it correct. Did you say that Midnight Theater, the restaurant will start in June and then the theater in the fall, Flower Girls will be in 2Q and Exiled Aliens will be in 3Q? Bill O’Dowd: Yes. Allen, that’s right, except the one more caveat that the restaurant -- and first of all, thank you for the kind words at the start of your comments. We’re very happy with our quarter as well. So, thank you. The Midnight Theater, the restaurant we anticipate opening in June, we’ll start the theater in previews. We have a variety of different acts we’re booking now for the summer. It’s a fully immersive theater experience. It will be a really great spot for music, for Broadway cabarets, for comedy acts, for a wide -- magic acts, a wide variety of entertainment. We’ll be doing previews of different types of acts over the summer. We have some pretty exciting announcements coming over the next several weeks. And then, the whole theater will have a grand opening in the fall with a full seven-day a week schedule of entertainment to go with the theater -- excuse me, with the restaurant. So, that’s the timing for Midnight Theater, yes. And then, in terms of the NFT collections, we’ve been building our ability to and have now finished our ability to sell NFT collections, taking a credit card, we’re excited for that. We have the Flower Girls partnership that we’re extremely excited by. We expect the Flower Girls announcement. We’re excited to share here in Q2, maybe be on the lookout for that. And then, we expect to have Exiled Aliens, the Creature Chronicles collection from Anthony Francisco finished and on sale in Q3.

And when you said you expected seven-figure revenues from the NFTs, was that referring to the Exiled Aliens drop and the Flower Girl drop, each one of them? Bill O’Dowd: Yes. Each collection will have a total retail value in the seven figures. So, that’s the expectation from your mouth, you got here, Allen, as we embark on this journey. But Flower Girls, the first collection did sell out, they achieved a $2 million initial sale of the -- excuse me, $2 million of the revenues from the initial collection and then they’ve generated over $13 million of secondary sales, stands for total collection revenue of over $15 million.

Great. Okay. And then, any commentary on the outlook for 2022? I mean, when I look at you, I would -- simplistically, I would think that your Super Group’s business should be better as the economy opens up, The Door recovers, there should be some and cross-selling that should probably be up year-over-year? And then for 2.0, it’s kind of just the timing of when it’s all going to kick in. But if there’s anything you could add of the -- and if there’s any seasonality to think about in the business? Bill O’Dowd: Sure. Yes. No, thank you. We think so too. First quarter is always the slowest for many of our subsidiaries. So, it wasn’t really surprising that last year, same was true. The first quarter was the lowest, but the growth has been steady. And as I mentioned at the top, it’s all organic, and there are no acquisitions that affected those numbers. Our last acquisition was effective as of January 1st of last year, the Bender/Helper. So, it really, quite frankly, we feel validated. It proved the thesis for Dolphin 1.0 that our acquisitions can cross-sell with each other. And the fact when you have the leading or the leaders in their respective fields. I mean, let’s just brag about 42West for a hot second, to be ranked, the second most powerful PR firm in the country, right, in any industry. Again, the leader in entertainment, then you’re going to receive your fair share of the growth of the industry. And the advent of these streaming services, I think probably everybody on this call subscribes to more than one streaming service. As we like to say back in 2018 and 2019, when we’re putting the Super Group together and was on the road, there’s going to…

That’s great. And then, on average, the margins will be higher than your company average for 2.0. Is that reasonable? Bill O’Dowd: Yes.

Then Super Groups, I mean, 2.0 will be higher than Super Groups? Bill O’Dowd: Yes. Yes. I mean, we have a very, very solid -- provide services business, right, as we can see, and people that know our story have seen this being built over four years. But as someone who may -- who did 20 years of content ownership, right, also before, in success, if you own the asset you’re marketing, you’re just going to make a much, much higher margin by definition, right? You can provide great marketing services for James Bond. But I promise you, the people that own James Bond are making more than we are. I’m just picking absurd example, right? Well, it’s the same across every layer. If it’s a food festival, if it’s a music festival, if it’s a consumer product, if you own the product, you’re going to make a lot more. And there’s certain -- and I guess, that’s the underlying assumption of our thesis, too, Allen. There are certain products where the marketing makes a bigger difference to whether they’re going to succeed, right? Think of marketing liquor or think of marketing beauty and cosmetics products or think of marketing perfume or think of marketing whatever you have as an example in your head where having the ability to market it and create consumer adoption is far more valuable than say, doing the same thing for an automotive -- automobile, right? I mean, the quality of the product matters a lot on the automobile, right? So, I think that’s what we’re looking for and use our marketing to the greatest monetary advantage for ourselves and our shareholders.

For items -- for the NFTs that you can create a brand that has -- becomes an annuity that you do continuing stories, continuing drops, what do you think is reasonable for how many like drops can be done a year? Bill O’Dowd: Well, funny part -- that’s a great question, Allen. And we have a lot of experts in-house on how it works in the analog world for marketing collectibles to the consumer. The truth is no one else. I mean, the NFT collections started really less than a year ago today. So, you’re always going to get a transparent answer. And the truth is we’re going to experiment. We think that the market can hold at least two drops per year per brand, and we’ll see if we’re right. And part of that is going to be how well you can engage the community. These people are buying NFTs to participate many of them in online communities around the brand. And we -- where we think we have a big advantage is that we can deliver a lot of community benefits. We have experiences, we can share with our communities, we have prizes and giveaways. We can supply that, quite frankly, very few others, if any, can provide because of backstage or invitations to venues and et cetera, et cetera, so. And then what we’re also excited about is something like Flower Girls is there’s a great brand, right? It’s got great art, it’s family-friendly, it’s charitable. And what can you do with Flower Girls, there are a lot of brand extensions for that type of community. And many of those brand extensions, and I don’t want to give away anything that we may be working on or we’ll have to announce shortly, fall into the areas of expertise of our companies. So, that’s exciting for us, and that’s why we selected that female-fronted NFT collection to partner with. We’re very excited about that collection. And they’ve done very well. They sold out, like I said.

That’s fantastic. So, for Midnight Theater, I’m just trying to remember, there -- Midnight Theater is -- it’s 160-seat venue. And then, the restaurant is 75 seats plus 20-seat private dining, 40-seat bar, lounge. Are there any public companies you could point us to just to think about like reasonable, like you said that we could model this based on number of seats and assumptions? Do you know if there’s any industry rule of thumb that you could point us to for that? Bill O’Dowd: Yes. And without getting into specific guidance preopening or anything, it’s a tricky one. I’m excited to talk a lot more about Midnight Theater over the subsequent earnings calls. I will say, if you think about, for lack of a better word, I’ll say, cool spots like that, do you look at certain groups that have that type of pedigree, whether it be TAO, obviously that was bought by Madison Square Garden, or others that could create locations around the country and around the globe. Where we think we have a difference, of course, is that our venue will have that high-quality restaurant, high-quality bar, but it’s got a theater, right, for live performance. And as you can imagine, we think we’re uniquely positioned to not just promote the come in there, but facilitate the relationships with the industry or the industries. So, there really is no direct comp because you could say in the old days, House of Blues, but I’m not sure they would have thought of themselves in the same vein on the restaurant and bar side. They -- and they were for music only. So what would you consider to be something similar? But we also think that’s the huge opportunity, right? The many people on this call are in New York City, very, very few places can offer a full night out in one location, and we can. And of course, it’s within a drop-dead gorgeous complex. I mean, it takes two city blocks what Brookfield built. It’s incredible. And right across the Plaza from us is the other restaurant that’s Danny Meyer’s restaurants that just got nominated for James Beard award, right? But if you want entertainment and a high-quality restaurant in the same venue, then we think we have something unique, so. But I think when you start modeling around those types of comps, I think you’d get pretty close.

Okay. Great. And you have so much on your plate, does producing movies still fit in there, or is that a maybe, or how do you think about that? Bill O’Dowd: Allen, I think you just have to wait a very short period of time for that vertical to open up for us. Going back to 2.0, we’ve been consistent in saying that the 4 legs of that stool for us will be taking ownership stakes in other people’s companies. So that’s Crafthouse, that’s FanJolt. It will be our own content, which hasn’t started yet, but patience. It will be our own consumer products, which has started. And to us, that’s NFTs in a weird way, Midnight Theater, because I mean that data practically encompasses all the categories. And then, of course, our own live events. So, I think it’s fair to say that we expect the content vertical to open up shortly, and the live event is probably closer to the end of the year for obvious reasons. We’re coming out of COVID, we’re feeling good. The music tours that our clients have booked are holding, music festivals are opened up. So, when the world -- the world is hungry for live entertainment, so we think we can get into live events by the end of the year, and content sooner.

Great. And I know you’re not really -- you’re not giving guidance, but any thoughts on like how you’re thinking about the financial discipline of managing revenue growth relative to expense growth? Bill O’Dowd: Sure. Well, I mean, if I could give Mirta and the team at Dolphin, a big pat on the back, I mean, we were on this call a year ago and said, we’re going to manage ourselves to make the 2.0 investments in 2021 out of the cash that we were generating. And I feel really good about where we ended when -- on that P&L subtracting the noncash items of depreciation and amortization, and the change in the fair value of the contingent consideration, we landed income -- operating income positive after making the investments in the NFT marketplace and others. So, I feel good about that. I think we will start to see our revenue exceed -- continue to grow, is what I’m trying to say, sorry, the operating income continue to grow. And then, with some of these opportunities, it’s always been -- just what are the opportunities that present themselves to us and do we want to take them. And if so, how we manage our own cash accordingly. But we’re profitable and we’re growing, and I think we’ll continue to stay, so even while we’re making these investments. Obviously, within a very short period of time, the 2.0 investments, we expect will generate outsized returns, right? So, it would just be a matter of investing a fraction of what we’re making. Right now, we’re choosing carefully because we’re growing our profits in this year and last year or this year and next year as we are making the first of the investment.

[Operator Instructions] Up next, we have Greg Greenberg, private investor. Greg, your line is live. Greg, can you hear us? Your line is live. Greg seems to be having technical difficulties. [Operator Instructions] I will put you back in the queue. Up next, we have Brian Swift [ph] with Security Research Associates.

Hi. Last year, you had a lot of noncash-type charges, which I assume were from a message, made prior. You said you only did one deal in January of this year, other than the fact that you may do more deals in ‘22. Do you -- how do you envision those types of charges? Is that like a nonrecurring thing, or are we going to see more of that because it kind of made your year-end statement? It looks like you’re losing a lot of money instead of the positive cash flow that you talked about. Bill O’Dowd: Sure. No, thank you for the question, Brian. We had some of those fair value instruments that are expiring or ending the puts end after last year, and that created large fair value swings in any given quarter or any given year. The contingent -- when we bought the companies for the Super Group, we provided the bulk of those acquisitions had earnouts, and that’s the contingent consideration. Proud to say how well the companies did in making their earnouts, which is what you want to see, I think, but they create noncash swings as well. So, we’re pretty much through that. After last year, there’s only one company left with an earn-out that will be earned, we anticipate by the end of this year. So a lot of these noncash items are expiring almost -- and it’s quite possible that all of them will by the end of this calendar year. So, we’re almost through those noncash items. Depreciation and amortization will stay with us, as you can imagine, for a while, but the bigger numbers that created the bigger swings, like in last year of the noncash items, should be -- we should be finished by the end of this year.

Next, we have Greg Greenberg. Greg, can you hear us. Your line is live. Okay. He has technical difficulties. We can’t hear you from our side, Greg. [Operator Instructions] We have no further questions in the queue. I’d like to turn the floor back to Bill O’Dowd for any closing remarks. Bill O’Dowd: Well, thank you. And Greg, if you’re out there, feel free to reach out to James Carbonara and be happy to line up the call with you. I’m sure it’s frustrating not to be able to get the tech to work. And obviously, James does a great job for us, and it was our honor to name the bar theater after him, just kidding. But thank you again to everyone that has followed our story. Obviously, we are very proud of the last year, hit some really nice milestones on a financial perspective, but that’s only the start. 2.0 is why we built this company. We’re excited for the investments we’ve made. We’re excited for both types of 2.0 investments, the ones where we take smaller ownership stakes in other people’s companies and the ones where we take a more active role and a larger stake in developing assets. And we think that combination of a profitable company, a profitable base that’s growing with those types of upsides is what makes us a little different, and hopefully, something that gets people excited to be -- to invest in and be a part of the journey. So, thank you for those who are, and I look forward to speaking to everybody again in just a few short weeks. So, thank you everybody for the time. Bye, bye.

Thank you. Ladies and gentlemen, this does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.