Florida
|
7200
|
86-0787790
|
(State
or other jurisdiction of incorporation or
organization)
|
(Primary
Standard Industrial Classification Code Number)
|
(I.R.S.
Employer Identification Number)
|
Kara L.
MacCullough, Esq.
|
Barry I. Grossman,
Esq.
|
Laurie L. Green,
Esq.
|
Sarah Williams,
Esq.
|
Greenberg Traurig,
P.A.
|
Ellenoff Grossman
& Schole LLP
|
401 East Las Olas
Boulevard, Suite 2000
|
1345 Avenue of the
Americas
|
Fort Lauderdale, FL
33301
|
New York, NY
10105
|
(954)
765-0500
|
(212)
370-1300
|
Large
accelerated filer
|
☐
|
Accelerated
filer
|
☐
|
Non-accelerated
filer
|
☐
|
Smaller
reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
Title of Each
Class of Securities to be Registered
|
Proposed Maximum Aggregate Offering
Price
(1)
|
Amount of Registration Fee
(1)
|
Units
(2)(3)
|
$
-
|
$
-
|
Shares of common
stock, par value $0.015, included in the units
(4)(5)
|
-
|
-
|
Warrants to
purchase shares of common stock, included in the units
(5)
|
-
|
-
|
Shares of common
stock underlying the warrants included in the units
(3)(4)
|
-
|
-
|
Underwriters’
warrants
(5)
|
-
|
-
|
Shares of common
stock underlying underwriters’ warrants
(4)(6)
|
$
|
$
-
|
Total:
|
$
18,578,250
|
$
2,312.99
(7)
|
|
|
|
|
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
declared effective. This preliminary prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted
|
|
|
|
|
|
Per
Unit
|
Total
|
Public offering
price
|
$
|
$
|
Underwriting
discount
(1)
|
$
|
$
|
Proceeds
before expenses
(2)
|
$
|
$
|
|
(1)
|
In addition to the
underwriting discount, we have agreed to issue to the underwriter
warrants to purchase a number of shares of common stock equal to 7%
of the total number of shares being sold in the offering, including
the over-allotments, if any, and to reimburse the underwriter for
expenses incurred by it in an amount not to exceed $150,000. See
“Underwriting” beginning on page 80 of this prospectus
for additional information regarding total underwriter
compensation.
|
|
(2)
|
We estimate the
total expenses of this offering will be approximately
$ . See
“Underwriting” for additional
information.
|
|
|
Page
|
PROSPECTUS
SUMMARY
|
|
1
|
RISK FACTORS
|
|
5
|
SPECIAL NOTE REGARDING FORWARD LOOKING
STATEMENTS
|
|
19
|
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS |
|
21
|
USE OF
PROCEEDS
|
|
26
|
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
|
27
|
DETERMINATION OF OFFERING
PRICE
|
|
28
|
CAPITALIZATION
|
|
29
|
DILUTION
|
|
30
|
SELECTED FINANCIAL
DATA
|
|
31
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
33
|
BUSINESS
|
|
55
|
PROPERTIES
|
|
62
|
LEGAL
PROCEEDINGS
|
|
62
|
MANAGEMENT
|
|
63
|
EXECUTIVE
COMPENSATION
|
|
67
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
|
|
68
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
|
70
|
DESCRIPTION OF
SECURITIES
|
|
73
|
UNDERWRITING
|
|
80
|
LEGAL MATTERS
|
|
83
|
EXPERTS
|
|
83
|
WHERE YOU CAN FIND MORE
INFORMATION
|
|
83
|
INDEX TO FINANCIAL
STATEMENTS
|
|
F-1
|
|
|
|
|
PROSPECTUS
SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. This summary does not contain all the
information that you should consider before investing in the
units. You should carefully read the entire
prospectus, including “Risk Factors”,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the financial
statements, before making an investment decision. In this
prospectus, the terms “Dolphin,”
“company,” “we,” “us” and
“our” refer to Dolphin Entertainment,
Inc.
Our Business
We are
a leading independent entertainment marketing and premium content
development company. Through our recent acquisition of 42West,
LLC, we provide expert strategic marketing and
publicity services to all of the major film studios, and many of
the leading independent and digital content providers, as well as
for hundreds of A-list celebrity talent, including actors,
directors, producers, recording artists, athletes and authors. The
strategic acquisition of 42West brings together premium marketing
services with premium content production, creating significant
opportunities to serve our respective constituents more
strategically and to grow and diversify our business. Our
content production business is a long established, leading
independent producer, committed to distributing premium,
best-in-class film and digital entertainment. We produce original
feature films and digital programming primarily aimed at family and
young adult markets.
Our Market Opportunity
We
believe the market for premium content marketing and content
development and production is large, growing and rapidly evolving.
Drivers of growth in our markets include:
●
Global
proliferation of high speed data networks and devices among
consumers creating more frequent engagement and on demand access to
media and content
●
Increasing demand
for more, engaging and original video content
●
Success and growth
of new platforms such as Netflix, Amazon, Facebook and
more
●
Multibillion dollar
strategic initiatives by new these new platforms to develop
original video content
●
Increasing
complexity and fragmentation of the media ecosystem driving
increased emphasis on and requirements for expert marketing
capabilities
Entertainment Publicity
On March 30,
2017, we acquired 42West, one of the leading full-service marketing
and public-relations firms in the entertainment industry, offering
clients preeminent experience, contacts, and
expertise. The name 42West symbolizes the agency’s position
in the nation’s largest entertainment markets: from
Manhattan’s 42nd Street (where the firm got its start) to the
West Coast (which it serves from its offices in Los Angeles).
42West’s professional capabilities are equally broad,
encompassing talent publicity and strategic communications as well
as entertainment, digital, and targeted marketing.
42West grew
out of The Dart Group, which was launched by Leslee Dart in 2004.
Amanda Lundberg teamed up with Dart a few months later. In 2006,
after Allan Mayer joined the partnership, the company was
rechristened 42West. Over the next ten years, 42West grew to become
the largest independently-owned public-relations firm in the
entertainment industry. This past December, the New York Observer
listed 42West as one of the six most powerful PR firms of any kind
in the United States.
Content
Production
In addition to
42West’s leading entertainment publicity business, we are
dedicated to the production of high-quality digital and motion
picture content. We also intend to expand into television
production in the near future. Our CEO, William O’Dowd, is an
Emmy-nominated producer and recognized leader in family
entertainment, with previous productions available in over 300
million homes in more than 100 countries around the world. Mr.
O’Dowd received 2017’s prestigious worldwide KidScreen
Award for Best New Tween/Teen Series as Executive Producer of
sitcom “Raising Expectations,” starring Molly Ringwald
and Jason Priestley.
|
|
|
|
|
|
|
|
|
Films
rated PG or PG-13 constituted 23 of the top 25
domestic grossing films in 2016 and family films are consistently
the highest grossing category at the box office. We have developed
a production pipeline of feature films and television series aimed
at the family market. Furthermore, we have had a dedicated division
servicing the digital video market for over 6 years, during which
time we have worked with most major ad-supported online
distribution channels, including Facebook, Yahoo!, Hulu and AOL.
Our digital productions have been recognized for their quality and
creativity, earning various awards including two Streamy
Awards.
Competitive Advantages
We have a long and loyal
list of marquee clients.
42West’s list of active
clients is both long (upwards of 400 in 2016) and distinguished
(including many of the world’s most famous and acclaimed
screen and pop stars, its most honored directors and producers,
every major movie studio, and virtually every digital platform and
content distributor, along with a host of production companies and
media firms as well as consumer-product marketers). The extensive
A-list nature of 42West’s client list is a huge competitive
advantage in an industry where the first question following a
new-business pitch is invariably: “Who else is
involved?” The firm’s client roster is
also highly stable. The churn rate among
42West’s clients is low; many of them have been with the firm
for years.
A stable and experienced
work force, led by an exceptional management team.
Our CEO,
Mr. O’Dowd, has a 20-year history of producing and delivering
high-quality family entertainment. In addition, 42West’s
three co-CEO’s, Leslee Dart, Amanda Lundberg, and Allan
Mayer, are all longtime PR practitioners, with decades of
experience, widely regarded as being among the top communications
strategists in the entertainment industry. They lead a staff of
roughly 100 PR professionals that is known for both its skill and
its longevity. Staff turnover is far below industry norms, and
every one of the firm’s six managing directors has been there
for more than nine years.
We believe that we are one
of the only entertainment companies that can offer clients a broad
array of interrelated services.
We believe that the ability
to create content for our 42West clients and the ability to
internally develop and execute marketing campaigns for our digital
and film productions will allow us to expand and grow each of our
business lines. For our 42West clients, celebrities and marketers,
the ability to control the content and quality of their digital
persona is critical in today’s digital world.
Growth Opportunities
We are
focused on driving growth through the following:
Expand and grow 42West to
serve more clients with a broad array of interrelated
services.
As a result of its acquisition by Dolphin,
42West now has the ability to create promotional and marketing
content for clients
,
a critical service for
celebrities and marketers alike in today’s digital world. We
believe that by adding content creation to
42West’s menu of capabilities, it will provide a great
opportunity to capitalize on unique synergies to drive
immediate organic growth, which will
allow us to both attract new clients and broaden our offering of
billable services to existing ones. We also believe that the skills
and experience of our 42West business in entertainment PR are
readily transferable to related business sectors such as sports or
fashion. The growing involvement in non-entertainment businesses by
many of our existing entertainment clients has allowed 42West to
establish a presence and develop expertise outside its traditional
footprint with little risk or expense. Using this as a foundation,
we are now working to expand our involvement in these new
areas.
Organically
grow through future synergies between 42West and our digital and
film productions
. Adding content creation to 42West’s
menu of capabilities provides a great opportunity for immediate
growth, as it will allow us to both attract new clients and broaden
our offering of billable services to existing ones. Furthermore,
bringing marketing expertise in-house will allow us to review a
prospective digital or film project’s marketing potential
prior to making a production commitment, thus allowing our
marketing strategy to be a driver of our creative content. In
addition, for each project greenlit for production, we can
potentially create a comprehensive marketing plan before the start
of principal photography, allowing for relevant marketing assets to
be created while filming. We can also create marketing campaigns
for completed films, across all media channels, including
television, print, radio, digital and social
media.
Opportunistically grow
through more complementary acquisitions.
We plan to
selectively pursue acquisitions in the future, to further enforce
our competitive advantages, scale and grow our business and
increase profitability. Our acquisition strategy is based on
identifying and acquiring companies that complement our existing
content production and entertainment
publicity services businesses. We believe that
complementary businesses, such as data analytics and digital
marketing, can create synergistic opportunities and bolster profits
and cash flow.
Build a portfolio of
premium film, television and digital content.
We intend to
grow and diversify our portfolio of film and digital content by
capitalizing on demand for high quality digital media and film
content throughout the world marketplace. We plan to balance our
financial risks against the probability of commercial success for
each project. We believe that our strategic focus on content and
creation of innovative content distribution strategies will enhance
our competitive position in the industry, ensure optimal use of our
capital, build a diversified foundation for future growth and
generate long-term value for our shareholders. Finally, we
believe that marketing strategies that will be
developed by 42West will drive our creative content, thus creating
greater potential for profitability.
Our Company Background
We
were first incorporated in the State of Nevada on March 7,
1995 and were domesticated in the State of Florida on
December 4, 2014. Effective July 6, 2017, we changed our
name from Dolphin Digital Media, Inc. to Dolphin Entertainment,
Inc. Our principal executive offices are located at 2151 Le
Jeune Road, Suite 150-Mezzanine, Coral Gables, Florida 33134. We
also have an office located at 10866 Wilshire Boulevard, Suite 800,
Los Angeles, California, 90024. 42West, LLC has offices located at
600 3rd Avenue, 23rd Floor, New York, New York, 10016 and 1840
Century Park East, Suite 700, Los Angeles, California 90067. Our
telephone number is (305) 774-0407 and our website address is
www.dolphinentertainment.com. Neither our website nor any
information contained on our website is part of this
prospectus.
Recent
Developments
Effective September
14, 2017, we amended our Amended and Restated Articles of
Incorporation to effectuate a 1-to-2 reverse stock split. The
reverse stock split was approved by our Board of Directors, or the
Board, on August 10, 2017 and shareholder approval was not
required. Immediately after the reverse stock split, the number of
authorized shares of common stock was reduced from 400,000,000 to
200,000,000 shares. As a result, each shareholder’s
percentage ownership interest in the Company and proportional
voting power remained unchanged. Any fractional shares resulting
from the reverse stock split were rounded up to the nearest whole
share of common stock. Unless otherwise indicated, the numbers set
forth in this prospectus have been adjusted to reflect the reverse
stock split.
|
|
|
|
|
|
|
|
|
Summary
Consolidated Financial Data and Pro Forma
Data
The
following tables include our summary historical
financial data. The historical financial data as of December 31,
2016 and 2015 and for the years ended December 31, 2016 and 2015
have been derived from our audited financial statements, which are
included elsewhere in this prospectus. The historical financial
data as of December 31, 2014 and for the year ended December 31,
2014 have been derived from our audited financial statements, which
are not included in this prospectus. The historical financial data
as of June 30, 2017 and for the six
months ended June 30, 2017 and 2016 have been derived
from our unaudited financial statements, which are included
elsewhere in this prospectus. Certain items have been reclassified
for presentation purposes. Our financial statements are prepared
and presented in accordance with generally accepted accounting
principles in the United States. The results indicated below are
not necessarily indicative of our future performance.
The
following tables also include summary
unaudited pro forma financial data reflecting our acquisition of
42West that was completed on March 30, 2017. The
unaudited pro forma financial data for the year ended December 31,
2016 and the six months ended June 30,
2017 have been derived from the unaudited pro forma combined
financial information included elsewhere in this prospectus. The
unaudited pro forma financial data for the year ended December 31,
2016 gives effect to the transaction as if it had occurred on
January 1, 2016. The unaudited pro forma financial data for the
six months ended June 30, 2017 gives
effect to the transaction as if it had occurred on January 1,
2017.
The
financial information set forth below is only a summary. You should
read this information together with our
“Capitalization”, “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations”, “Selected Financial Data”,
“Unaudited Pro Forma Combined Statements of
Operations” and our consolidated financial statements
and related notes included elsewhere in this
prospectus.
|
|
Pro Forma
Data:
|
Pro
Forma
|
Pro
Forma
|
|
For the year
ended
December 31,
2016
|
For the six
months
ended
June 30,
2017
|
|
(unaudited)
|
(unaudited)
|
Revenues
|
$
27,959,374
|
$
13,054,074
|
Operating
Loss
|
(14,989,692
)
|
(131,112
)
|
Net Income
(Loss)
|
$
(35,769,543
)
|
$
4,542,982
|
Net Income (Loss)
attributable to common shareholders
|
$
(41,016,770
)
|
$
4,542,982
|
Net loss
attributable to common shareholders for fully diluted
calculation
|
$
(41,016,770
)
|
$
(1,746,531
)
|
|
|
|
Income (Loss) Per
share:
|
|
|
Basic
|
$
(6.66
)
|
$
0.52
|
Diluted
|
$
(6.66
)
|
$
(0.18
)
|
Weighted average
number of shares used in per share calculation:
|
|
|
Basic:
|
6,157,425
|
8,661,185
|
Diluted:
|
6,157,425
|
9,910,688
|
|
Consolidated
Financial
Data:
|
||||
|
Historical
|
Historical
|
|||
|
For the year
ended
December
31,
|
For the
six months
ended
June
30,
|
|||
|
2014
|
2015
(1)
|
2016
|
2016
|
2017
|
|
(audited)
|
(unaudited)
|
|||
Revenues:
|
|
|
|
|
|
Production and
distribution
|
$
51,192
|
$
3,031,073
|
$
9,367,222
|
$
4,157
|
$
3,226,962
|
Entertainment
publicity
|
-
|
-
|
-
|
-
|
5,137,556
|
Service
|
2,000,000
|
-
|
-
|
-
|
-
|
Membership
|
19,002
|
69,761
|
28,403
|
21,028
|
-
|
Total
Revenue
|
2,070,194
|
3,100,834
|
9,395,625
|
25,185
|
8,364,518
|
Loss before other
income (expense)
|
(1,252,925
)
|
(5,373,132
)
|
(17,702,264
)
|
(2,258,553
)
|
(779,092
)
|
Net Income
(Loss)
|
$
(1,873,505
)
|
$
(8,836,362
)
|
$
(37,189,679
)
|
$
(11,247,780
)
|
$
3,402,623
|
Net Income (Loss)
attributable to common shareholders
|
$
(1,873,505
)
|
$
(8,836,362
)
|
$
(42,436,906
)
|
$
(16,475,027
)
|
$
3,402,623
|
Income (Loss) Per
Share
|
|
|
|
|
|
Basic
|
$
(0.92
)
|
$
(4.32
)
|
$
(9.67
)
|
$
(5.45
)
|
$
0.41
|
Diluted
|
$
(0.92
)
|
$
(4.32
)
|
$
(9.67
)
|
$
(5.45
)
|
$
(0.30
)
|
Weighted average
number of shares used in per share calculation:
|
|
|
|
|
|
Basic
|
2,047,309
|
2,047,309
|
4,389,097
|
3,025,448
|
8,293,343
|
Diluted
|
2,047,309
|
2,047,309
|
4,389,097
|
3,025,448
|
9,542,846
|
|
|
|
|
|
|
|
|
|
|
(1) Financial information has been
retrospectively adjusted for the acquisition of Dolphin Films. See
Notes 1 and 4 to our consolidated financial statements included
elsewhere in this prospectus.
(2) The as adjusted balance sheet data
give effect to our issuance and sale of units in this offering at
an offering price of $ per unit, after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
|
|
|
|
|
|
As
of
|
As
of
|
|
December
31,
2016
|
June
30,
2017
|
Related party
debt
|
$
684,326
|
$
1,818,659
|
Max Steel
debt
|
$
18,743,069
|
$
12,892,544
|
Total Debt
(including related party debt)
|
$
19,727,395
|
$
20,611,203
|
Total
Stockholders’ Deficit
|
$
31,867,797
|
$
3,024,560
|
|
Dolphin Digital
Media, Inc. (Historical)
|
42West - Acquiree
(Historical)
|
Pro Forma
Adjustments
|
Notes
|
Pro Forma
Combined
|
Revenues
|
$
9,395,625
|
$
18,563,749
|
$
—
|
|
$
27,959,374
|
Operating expenses
exclusive of depreciation and amortization
|
27,097,889
|
15,851,177
|
—
|
|
42,949,066
|
Operating (loss)
income
|
(17,702,264
)
|
2,712,572
|
—
|
|
(14,989,692
)
|
Depreciation and
amortization(1)
|
(476,250
)
|
(213,846
)
|
(997,333
)
|
(A)
|
(1,687,429
)
|
Interest
expense
|
(4,241,841
)
|
(21,505
)
|
|
|
(4,263,346
)
|
Change in fair
value of warrant liability
|
2,195,542
|
—
|
—
|
|
2,195,542
|
Warrant issuance
expense
|
(7,372,593
)
|
—
|
—
|
|
(7,372,593
)
|
Loss on
extinguishment of debt
|
(9,601,933
)
|
—
|
—
|
|
(9,601,933
)
|
Other income
(expense)
|
9,660
|
(59,752
)
|
—
|
|
(50,092
)
|
Net (loss)
income
|
$
(37,189,679
)
|
$
2,417,469
|
$
(997,333
)
|
|
$
(35,769,543
)
|
Deemed dividend on
preferred stock
|
5,247,227
|
—
|
—
|
|
5,247,227
|
Net loss
attributable to common shareholders
|
$
(42,436,906
)
|
$
2,417,469
|
$
(997,333
)
|
|
$
(41,016,770
)
|
Basic and Diluted
Loss per Share
|
$
(9.67
)
|
—
|
—
|
|
$
(6.66
)
|
Weighted average
number of shares used in share calculation
|
4,389,096
|
—
|
—
|
(E)
|
6,157,425
|
|
Acquisition Date
Opening Balance
|
Useful Live
(Years)
|
Annual
Amortization
|
Quarterly
Amortization
|
Intangible
assets:
|
|
|
|
|
Customer
relationships
|
$
5,980,000
|
10
|
$
598,000
|
$
149,500
|
Trade
name
|
2,760,000
|
10
|
$
276,000
|
$
69,000
|
Non-competition
agreements
|
370,000
|
3
|
$
123,833
|
$
30,833
|
|
$
9,110,000
|
|
$
997,333
|
$
249,333
|
|
Historical
|
Pro Forma
|
Numerator
|
6/30/2017
|
6/30/2017
|
Net
income (loss) attributable to Dolphin
shareholders
|
$
3,402,623
|
$
4,542,982
|
Numerator
for basic earnings per share
|
3,402,623
|
4,542,982
|
Change
in fair value of G, H and I warrants
|
(6,289,513
)
|
(6,289,513
)
|
Numerator
for diluted earnings per share
|
(2,886,890
)
|
(1,746,531
)
|
|
|
|
Denominator
|
|
|
Denominator
for basic EPS - weighted-average shares
|
8,293,343
|
8,661,185
|
Effect
of dilutive securities:
|
|
|
Warrants
|
756,338
|
756,338
|
Shares
issuable in January 2018 as part of the Additional Consideration
for the 42West acquisition
|
493,165
|
493,165
|
Denominator
for diluted EPS - adjusted weighted-average shares assuming
exercise of warrants
|
9,542,846
|
9,910,688
|
|
|
|
Basic
income (loss) per share
|
$
0.41
|
$
0.52
|
Diluted
income (loss) per share
|
$
(0.30
)
|
$
(0.18
)
|
Quarter
|
High
Bid
|
Low
Bid
|
2017:
|
|
|
October 1 to
4
|
$
8.15
|
$
8.00
|
Third
Quarter
|
$
10.00
|
$
6.06
|
Second
Quarter
|
$
10.50
|
$
6.00
|
First
Quarter
|
$
12.00
|
$
7.00
|
|
|
|
2016:
|
|
|
Fourth
Quarter
|
$
13.50
|
$
4.00
|
Third
Quarter
|
$
14.50
|
$
8.00
|
Second
Quarter
|
$
16.54
|
$
10.80
|
First
Quarter
|
$
15.20
|
$
3.20
|
|
|
|
2015:
|
|
|
Fourth
Quarter
|
$
12.00
|
$
1.20
|
Third
Quarter
|
$
2.00
|
$
1.20
|
Second
Quarter
|
$
2.40
|
$
1.60
|
First
Quarter
|
$
3.60
|
$
1.60
|
(1)
|
Consists of debt of
our subsidiaries used to produce and pay the print and advertising
expenses of
Max
Steel
.
|
(2)
|
Consists of our
obligation to purchase up to 1,070,503 shares of our common stock
from the sellers of 42West during certain specified exercise
periods up until December 2020, pursuant to put agreements. For a
discussion of the terms of the put agreements, see
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
|
Assumed
public offering price per unit
|
|
$
|
|
|
Net
tangible book value deficit per share as of June 30,
2017
|
|
$
|
(2.81)
|
|
Increase
in net tangible book value per share attributable to new
investors
|
|
$
|
|
|
Adjusted
net tangible book value deficit per share as of June 30,
2017, after giving effect to the offering
|
|
$
|
|
|
Dilution
per share to new investors in the offering
|
|
$
|
|
|
(1)
|
Financial
information has been retrospectively adjusted for our acquisition
of Dolphin Films. See Notes 1 and 4 to the consolidated financial
statements included elsewhere in this
prospectus.
|
|
For the six
months
ended
June
30,
|
|
Revenues:
|
2017
|
2016
|
Production and
distribution
|
$
3,226,962
|
$
4,157
|
Entertainment
publicity
|
5,137,556
|
–
|
Membership
|
–
|
21,028
|
Total
revenues:
|
$
8,364,518
|
$
25,185
|
|
For the six months
ended
June
30,
|
|
Expenses:
|
2017
|
2016
|
Direct
costs
|
$
2,500,772
|
$
2,429
|
Distribution and
marketing
|
629,493
|
–
|
Selling, general
and administrative
|
1,213,400
|
562,576
|
Payroll
|
3,802,511
|
751,202
|
Legal and
professional
|
997,434
|
967,531
|
Total
expenses
|
$
9,143,610
|
$
2,238,738
|
|
For the six
months
ended
June
30,
|
|
Other
(Income) Expense:
|
2017
|
2016
|
Other (income) and
expenses
|
$
16,000
|
$
(9,660
)
|
Amortization of
intangible assets
|
249,333
|
–
|
Loss on
extinguishment of debt
|
4,167
|
5,843,811
|
Loss on disposal of
furniture, office equipment and leasehold
improvements
|
28,025
|
–
|
Acquisition related
costs
|
745,272
|
–
|
Change in fair
value of warrant liability
|
(6,289,513
)
|
–
|
Change in fair
value of contingent consideration
|
116,000
|
–
|
Change in fair
value of put rights
|
100,000
|
–
|
Interest
expense
|
849,001
|
3,155,076
|
Other
(Income)/expense
|
$
(4,181,715
)
|
$
8,989,227
|
|
For the year
ended
December
31,
|
|
Revenues:
|
2016
|
2015
|
Production and
distribution
|
$
9,367,222
|
$
3,031,073
|
Membership
|
28,403
|
69,761
|
Total
revenue
|
$
9,395,625
|
$
3,100,834
|
|
For the year
ended
December
31,
|
|
Expenses:
|
2016
|
2015
|
Direct
costs
|
$
10,661,241
|
$
2,587,257
|
Distribution and
marketing
|
11,322,616
|
213,300
|
Selling, general
and administrative
|
1,245,689
|
1,845,088
|
Legal and
professional
|
2,405,754
|
2,392,556
|
Payroll
|
1,462,589
|
1,435,765
|
Total
expenses
|
$
27,097,889
|
$
8,473,966
|
|
For the year
ended
December
31,
|
|
Other
Income and expenses:
|
2016
|
2015
|
Other
income
|
$
9,660
|
$
96,302
|
Amortization of
loan fees
|
(476,250
)
|
–
|
Change in fair
value of warrant liability
|
2,195,542
|
–
|
Warrant issuance
expense
|
(7,372,593
)
|
–
|
Loss on
extinguishment of debt
|
(9,601,933
)
|
–
|
Interest
expense
|
(4,241,841
)
|
(3,559,532
)
|
Total
|
$
(19,487,415
)
|
$
(3,463,230
)
|
a)
|
We
entered into thirteen individual agreements with parties to loan
and security agreements under which we issued promissory notes to
each of the parties. Pursuant to the terms of the debt exchange
agreements, we converted an aggregate $3.75 million of principal
and approximately $0.4 million of interest under the promissory
notes into an aggregate of 420,455 shares of common stock at $10.00
per share as payment in full of each of the promissory notes. The
market price per share was between $12.00 and $12.90 per share at
the time of the conversions. As a result, we recorded a loss on
extinguishment of debt related to these loan and security
agreements of $0.9 million on our consolidated statement of
operations.
|
b)
|
We
entered into three debt exchange agreements with parties to equity
finance agreements. Pursuant to the terms of the agreements, we
converted an aggregate $0.3 million of principal and interest into
an aggregate of 33,100 shares of our common stock at $10.00 per
share as payment in full for each equity finance agreement. The
market price per share was between $12.50 and $13.50 per share at
the time of the conversions. As a result, we recorded a loss on
extinguishment of debt related to these equity finance agreements
of $0.1 million on our consolidated statements of operations. We
also entered into a settlement agreement with a separate party to
an equity finance agreement. Pursuant to the terms of the
settlement agreement, we agreed to pay $0.2 million and recorded a
loss on extinguishment of debt on our consolidated statement of
operations of approximately $0.1 million related to this settlement
agreement.
|
c)
|
We
entered into a debt exchange agreement with a party to a kids club
agreement. Pursuant to the terms of the agreements, we converted
$0.06 million on principal and interest into 6,000 shares of our
common stock at $10.00 per share as payment in full of the kids
club agreement. The market price per share was $13.50 per share at
the time of the conversion. As a result, we recorded $0.02 million
of loss on extinguishment of debt on our consolidated statements of
operations, related to this kids club agreement.
|
d)
|
We
entered into a subscription agreement with Dolphin Entertainment,
LLC. Pursuant to the terms of the subscription agreement, we
converted $3.0 million of principal and interest outstanding on a
revolving promissory note into 307,341 shares of our common stock
at a price of $10.00 per share. At the time of the conversion,
market price per share of common stock was $12.00. As a result, we
recorded a loss on the extinguishment of debt of $0.6 million on
its condensed consolidated statement of operations for the year
ended December 31, 2016.
|
e)
|
We
entered into various individual debt exchange agreements with
parties to loan and security agreements under which we issued
promissory notes to each of the parties. Pursuant to the debt
exchange agreements, we agreed to convert an aggregate $17.9
million in principal and interest under the promissory notes into
an aggregate of 1.8 million shares of common stock at a price of
$10.00 per share as payment in full of each of the promissory
notes. On the dates of conversion the market price per share of
common stock was between $12.16 and $13.98 and as a result, we
recorded a loss on the extinguishment of debt of $4.6 million our
consolidated statements of operations.
|
f)
|
We
entered into a termination agreement and a debt exchange agreement
whereby we issued Warrants J and K that entitled the holder to
purchase shares of our common stock at a price of $0.03. In
exchange the warrant holder agreed to convert an aggregate of $6.5
million of debt. Warrant K entitled the warrant holder to purchase
up to 85,000 shares of our common stock and Warrant J entitled the
warrant holder to purchase up to 1,085,000 but also includes
consideration for the purchase of a 25% interest in Dolphin Kids
Clubs. We recorded loss on extinguishment of debt of $3.2 million
related to these agreements.
|
Notes:
|
Outstanding
Balance
|
First Group Film
Funding note
|
$
1,160,000
|
Web Series Funding
note
|
340,000
|
Second Group Film
Funding note
|
4,970,990
|
|
$
6,470,990
|
Level
1 —
|
Inputs
are quoted prices in active markets for identical assets or
liabilities as of the reporting date.
|
Level
2 —
|
Inputs
other than quoted prices included within Level 1, such as quoted
prices for similar assets and liabilities in active markets; quoted
prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be
corroborated with observable market data.
|
Level
3 —
|
Unobservable
inputs that are supported by little or no market activity and that
are significant to the fair value of the assets and liabilities.
This includes certain pricing models, discounted cash flow
methodologies, and similar techniques that use significant
unobservable inputs. Unobservable inputs for the asset or liability
that reflect management’s own assumptions about the
assumptions that market participants would use in pricing the asset
or liability as of the reporting date.
|
|
As
of December 31, 2016
|
||||
Inputs
|
Series
G
|
Series
H
|
Series
I
|
Series
J
|
Series
K
|
Volatility
(1)
|
63.6
%
|
79.1
%
|
70.8
%
|
65.8
%
|
65.8
%
|
Expected term
(years)
|
1.08
|
2.08
|
3.08
|
4
|
4
|
Risk free interest
rate
|
.879
%
|
1.223
%
|
1.489
%
|
1.699
%
|
1.699
%
|
Common stock
price
|
$
12.00
|
$
12.00
|
$
12.00
|
$
12.00
|
$
12.00
|
Exercise
price
|
$
10.00
|
$
12.00
|
$
14.00
|
$
.03
|
$
.03
|
●
|
Tweens
(roughly 9-14 years old);
|
|
●
|
Teens
and young adults (roughly 14-24 years old); and
|
|
●
|
General
market (roughly 14-49 years old).
|
|
NAME
|
|
AGE
|
|
PRINCIPAL
OCCUPATION
|
William
O’Dowd, IV
|
|
48
|
|
Chairman,
President and Chief Executive Officer
|
Michael
Espensen
|
|
67
|
|
Director
|
Nelson
Famadas
|
|
44
|
|
Director
|
Allan
Mayer
|
|
67
|
|
Director
|
Mirta A
Negrini
|
|
53
|
|
Director,
Chief Financial and Operating Officer
|
Justo
Pozo
|
|
60
|
|
Director
|
Nicholas
Stanham, Esq.
|
|
49
|
|
Director
|
NAME
|
|
AGE
|
|
PRINCIPAL
OCCUPATION
|
William
O’Dowd, IV
|
|
48
|
|
Chief
Executive Officer
|
Mirta A
Negrini
|
|
53
|
|
Chief
Financial and Operating Officer
|
NAME
|
|
AGE
|
|
PRINCIPAL
OCCUPATION
|
Leslee
Dart
|
|
63
|
|
Co-Chief Executive
Officer of 42West
|
Amanda
Lundberg
|
|
52
|
|
Co-Chief Executive
Officer of 42West
|
Name and
Principal Position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
All Other
Compensation
($)
|
Total
($)
|
William
O’Dowd, IV (1)
|
|
2016
|
250,000
|
—
|
377,403
(2)
|
627,403
|
Chairman and Chief
Executive Officer
|
|
2015
|
250,000
|
—
|
574,947
|
824,947
|
Mirta A
Negrini
|
|
2016
|
200,000
|
—
|
—
|
200,000
|
Chief Financial and
Operating Officer
|
|
2015
|
150,000
|
50,000
|
—
|
200,000
|
Name and Address
of Owner
(1)
|
# of Shares
of
Common
Stock
|
% of
Class
(Common
Stock)
|
Directors and Executive Officers
|
|
|
William
O’Dowd, IV
(2)
|
1,625,843
|
17.4
%
|
Michael
Espensen
|
278
|
*
|
Nelson
Famadas
|
1,993
|
*
|
Allan
Mayer
(3)
|
154,867
|
1.7
%
|
Mirta A
Negrini
|
––
|
*
|
Justo
Pozo
(4)
|
1,215,332
|
13.0
%
|
Nicholas Stanham,
Esq.
(5)
|
14,334
|
*
|
All Directors and
Executive Officers as a Group (7 persons)
|
3,012,646
|
32.2
%
|
5% Holders
|
|
|
Stephen L.
Perrone
(6)
|
2,050,000
|
21.5
%
|
T Squared Partners
LP
(7)
|
952,000
|
9.9
%
|
Alvaro and Lileana
de Moya
(8)
|
603,742
|
6.4
%
|
Name and Address
of Owner
(1)
|
# of Shares of Preferred
Stock
|
% of
Class
(Preferred
Stock)
|
William
O’Dowd, IV
(9)
|
50,000
|
100
%
|
(1)
|
Unless otherwise
indicated, the address of each shareholder is c/o Dolphin
Entertainment, Inc., 2151 Le Jeune Road, Suite 150, Mezzanine,
Coral Gables, Florida, 33134.
|
(2)
|
The amount shown
includes (1) 621,052 shares of common stock held by Dolphin Digital
Media Holdings LLC, which is wholly-owned by Mr. O’Dowd, (2)
527,841 shares of common stock held by Dolphin Entertainment, LLC,
which is wholly-owned by Mr. O’Dowd and (3) 476,950 shares of
common stock held by Mr. O’Dowd individually. Does not
include shares of common stock that are issuable upon conversion of
the Series C Convertible Preferred Stock upon the determination by
the independent directors of the Board that an optional conversion
threshold has occurred. In accordance with the terms of our Amended
and Restated Articles of Incorporation, as amended, each share of
Series C Convertible Preferred Stock will be convertible into one
half of a share of common stock, subject to adjustment for each
issuance of common stock (but not upon issuance of common stock
equivalents) that occurred, or occurs, from the date of issuance of
the Series C Convertible Preferred Stock (the “issue
date”) until the fifth (5th) anniversary of the issue date
(i) upon the conversion or exercise of any instrument issued on the
issue date or thereafter issued (but not upon the conversion of the
Series C Convertible Preferred Stock), (ii) upon the exchange of
debt for shares of common stock, or (iii) in a private placement,
such that the total number of shares of common stock held by an
“Eligible Class C Preferred Stock Holder” (based on the
number of shares of common stock held as of the date of issuance)
will be preserved at the same percentage of shares of common stock
outstanding held by such Eligible Class C Preferred Stock Holder on
such date. An Eligible Class C Preferred Stock Holder means any of
(i) Dolphin Entertainment, LLC for so long as Mr. O’Dowd
continues to beneficially own at least 90% and serves on the board
of directors or other governing entity, (ii) any other entity in
which Mr. O’Dowd beneficially owns more than 90%, or a trust
for the benefit of others, for which Mr. O’Dowd serves as
trustee and (iii) Mr. O’Dowd individually. Series C
Convertible Preferred Stock will only be convertible by the
Eligible Class C Preferred Stock Holder upon our company satisfying
one of the “optional conversion thresholds”.
Specifically, a majority of the independent directors of the Board,
in its sole discretion, must have determined that our company
accomplished any of the following (i) EBITDA of more than $3.0
million in any calendar year, (ii) production of two feature films,
(iii) production and distribution of at least three web series,
(iv) theatrical distribution in the United States of one feature
film, or (v) any combination thereof that is subsequently approved
by a majority of the independent directors of the Board based on
the strategic plan approved by the Board. While certain events may
have occurred that could be deemed to have satisfied this criteria,
the independent directors of the Board have not yet determined that
an optional conversion threshold has occurred.
|
(3)
|
The amount shown is
beneficially owned by Mr. Mayer and is held by the Mayer-Vogel
Trust, for which Mr. Mayer serves as
trustee.
|
(4)
|
The amount shown
includes: (i) 508,869 shares held by Pozo Opportunity Fund I, LLC;
(ii) 342,115 shares held by Pozo Opportunity Fund II, LLC; (iii)
336,945 shares held by Pozo Capital Partners, LLC; (iv) 938 shares
held by the Zulita Pina Irrevocable Trust; (v) 875 shares held by
Justo Pozo ACF Ricardo S. Pozo U/FI/UTMA; (vi) 625 shares held by
the Carolina Pozo Roth IRA; and (vii) 24,966 shares held by Justo
Luis and Sylvia E. Pozo. Mr. Pozo is the beneficial owner of all of
the shares and has sole voting and dispositive power with respect
to all of the shares except for (i) 24,966 shares with respect to
which he shares voting and dispositive power with his spouse, (ii)
1,500 shares with respect to which he shares voting and dispositive
power with his children; and (iii) 336,945 shares held by Pozo
Capital Partners, LLC with respect to which Mr. Pozo shares voting
and dispositive power with his spouse and
children.
|
(5)
|
Mr. Stanham shares
voting and dispositive power with respect to all of the shares of
common stock with his spouse.
|
(6)
|
The amount shown
includes: (i) 1,235,000 shares held by KCF Investments LLC; (ii)
385,000 shares held by BBCF 2011 LLC; (iii) 225,000 shares held by
BBCD LLC; (iv) 5,000 shares held by Mr. Perrone as an individual;
and (v) 25,000 shares held by Strocar Investments LLC. The amount
shown also includes 175,000 shares issuable upon the exercise of a
common stock purchase warrant that is exercisable within 60 days
after October 2, 2017. Stephen L. Perrone (4450 US Highway #1, Vero
Beach, FL 32967) is the beneficial owner of all of the shares and
has sole voting and dispositive power with respect to all of the
shares.
|
(7)
|
The amount shown is
based upon: (i) 12,115 shares issuable upon the exercise of a Class
E Warrant; (ii) 175,000 shares issuable upon the exercise of a
Class F Warrant; (iii) 750,000 shares issuable upon the exercise of
a Class G Warrant; (iv) 250,000 shares issuable upon the exercise
of a Class H Warrant; (v) 250,000 shares issuable upon the exercise
of a Class I Warrant; and (vi) 15,089 shares held by Mark Jensen
and/or Thomas M. Suave and related entities owned by Mark Jensen
and/or Thomas M. Suave. Each of the warrants is
convertible/exercisable within 60 days after October 2, 2017, to
the extent that after giving effect to such conversion/exercise,
the holder (together with the holder’s affiliates) would not
beneficially own in excess of 9.9% of the number of shares of
common stock outstanding immediately after giving effect to such
conversion/exercise. Mark Jensen and Thomas M. Suave are both
principals of T Squared Partners LP (P.O. Box 606, Fishers, IN
46038) and are each deemed to have beneficial ownership of all the
shares. Mr. Jensen and Mr. Suave have shared voting and dispositive
power over all shares beneficially owned by T Squared Partners
LP.
|
(8)
|
The amount shown
includes: (i) 75,000 shares held by the Alvaro de Moya Revocable
Trust; (ii) 75,000 shares held by the Lileana de Moya Revocable
Trust; (iii) 100,000 shares held by the Lileana de Moya Lifetime
Trust; (iv) 10,000 shares held by the Alvaro de Moya Grantor
Retained Annuity Trust; and (v) 343,742 held by Alvaro and Lileana
de Moya.
Alvaro and Lileana
de Moya serve as trustees for these entities and have shared voting
and dispositive power over all the shares beneficially
owned.
|
(9)
|
The Series C
Convertible Preferred Stock are held by Dolphin Entertainment, LLC
which is wholly-owned by Mr. O’Dowd.
|
Underwriters
|
|
Number of
Units
|
Maxim Group
LLC
|
|
|
Ladenburg Thalmann
& Co.
|
|
|
Total
|
|
|
|
|
Total
|
|
|
Per
Unit
|
Without
Over-Allotment
|
With
Over-Allotment
|
Public offering
price
|
$
|
$
|
$
|
Underwriting
discount (7%)
|
$
|
$
|
$
|
Proceeds, before
expenses, to us
|
$
|
$
|
$
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-42
|
|
|
F-43
|
|
|
F-44
|
|
|
F-45
|
|
|
F-46
|
F-83
|
|
F-84
|
|
F-85
|
|
F-86
|
|
F-87
|
|
F-88
|
DOLPHIN DIGITAL MEDIA, INC. AND SUBSIDIARIES
|
||
C
onsolidated Balance
Sheets
|
||
As of December 31, 2016 and 2015
|
||
ASSETS
|
2016
|
2015
(1)
|
Current
|
|
|
Cash
and cash equivalents
|
$
662,546
|
$
2,392,685
|
Restricted
cash
|
1,250,000
|
-
|
Prepaid
Expenses
|
-
|
72,518
|
Related
party receivable
|
-
|
453,529
|
Accounts
receivable
|
3,668,646
|
-
|
Other
current assets
|
2,665,781
|
2,827,131
|
Total
Current Assets
|
8,246,973
|
5,745,863
|
Capitalized
production costs
|
4,654,013
|
15,170,768
|
Property
and equipment
|
35,188
|
55,413
|
Deposits
|
1,261,067
|
397,069
|
Total
Assets
|
$
14,197,241
|
$
21,369,113
|
LIABILITIES
|
|
|
Current
|
|
|
Accounts
payable
|
$
677,249
|
$
2,070,545
|
Other
current liabilities
|
2,958,523
|
2,984,320
|
Warrant
liability
|
14,011,254
|
-
|
Accrued
compensation
|
2,250,000
|
2,065,000
|
Debt
|
18,743,069
|
37,331,008
|
Loan
from related party
|
684,326
|
2,917,523
|
Deferred
revenue
|
46,681
|
1,418,368
|
Note
payable
|
300,000
|
300,000
|
Total
Current Liabilities
|
39,671,102
|
49,086,764
|
Noncurrent
|
|
|
Convertible
note
|
-
|
3,164,000
|
Warrant
liability
|
6,393,936
|
|
Loan
from related party
|
-
|
1,982,267
|
Total
Noncurrent Liabilities
|
6,639,936
|
5,146,267
|
Total
Liabilities
|
46,065,038
|
54,233,031
|
STOCKHOLDERS' DEFICIT
|
|
|
Common
stock, $0.015 par value, 200,000,000
shares authorized, 7,197,761 and
2,047,309, respectively, issued and outstanding at
December 31, 2016 and 2015
|
107,968
|
30,710
|
Preferred
Stock 10,000,000 shares authorized, Preferred Stock, Series A
$0.001 par value, liquidation preference of 1,042,756, 1,043
shares authorized, issued and outstanding at December
31, 2015. None were issued and outstanding at December 31,
2016
|
-
|
1,043
|
Preferred
Stock, Series B, $0.10 par value, 4,000,000 shares
authorized, 2,300,000 shares issued and outstanding at
December 31, 2015, none were issued and outstanding at December 31,
2016
|
-
|
230,000
|
Preferred
Stock, Series C, $0.001 par value, 1,000,000 shares authorized,
1,000,000 shares issued and outstanding at December 31, 2016 and
2015
|
1,000
|
1,000
|
Additional
paid in capital
|
67,835,439
|
26,510,949
|
Accumulated
deficit
|
(99,812,204
)
|
(62,615,428
)
|
Total
Dolphin Digital Media, Inc. Deficit
|
(31,867,797
)
|
(35,841,726
)
|
Non-controlling
interest
|
-
|
2,977,808
|
Total
Stockholders' Deficit
|
(31,867,797
)
|
(32,863,918
)
|
Total
Liabilities and Stockholders' Deficit
|
$
14,197,241
|
$
21,369,113
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
||
(1)
Financial information has been
retrospectively adjusted for the acquisition of Dolphin Films, Inc.
See Notes 1 and 4
.
|
|
|
2016
|
2015
(1)
|
Revenues:
|
|
|
Production
and distribution
|
$
9,367,222
|
$
3,031,073
|
Membership
|
28,403
|
69,761
|
Total
Revenue:
|
9,395,625
|
3,100,834
|
|
|
|
Expenses:
|
|
|
Direct
costs
|
10,661,241
|
2,587,257
|
Distribution
and marketing
|
11,322,616
|
213,300
|
Selling,
general and administrative
|
1,245,689
|
1,845,088
|
Legal
and professional
|
2,405,754
|
2,392,556
|
Payroll
|
1,462,589
|
1,435,765
|
Loss
before other income (expense)
|
(17,702,264
)
|
(5,373,132
)
|
|
|
|
Other
Income(Expense)
|
|
|
Other
income
|
9,660
|
96,302
|
Amortization
of loan fees
|
(476,250
)
|
-
|
Change
in fair value of warrant liability
|
2,195,542
|
-
|
Warrant
issuance expense
|
(7,372,593
)
|
-
|
Loss
on extinguishment of debt
|
(9,601,933
)
|
-
|
Interest
expense
|
(4,241,841
)
|
(3,559,532
)
|
Total
Other Income(Expense)
|
(19,487,415
)
|
(3,463,230
)
|
Net
Loss
|
$
(37,189,679
)
|
$
(8,836,362
)
|
|
|
|
Net
Income attributable to noncontrolling interest
|
-
|
17,440
|
Net
loss attributable to Dolphin Films, Inc.
|
-
|
(4,786,341
)
|
Net
Loss attributable to Dolphin Digital Media, Inc.
|
(37,189,679
)
|
(4,067,461
)
|
|
$
(37,189,679
)
|
$
(8,836,362
)
|
|
|
|
Deemed dividend on preferred stock
|
5,247,227
|
-
|
|
|
|
Net loss attributable to common shareholders
|
$
(42,436,906
)
|
$
(8,836,362
)
|
|
|
|
Basic
and Diluted Loss per Share
|
$
(9.67
)
|
$
(4.32
)
|
|
|
|
Weighted
average number of shares used in share calculation
|
4,389,097
|
2,047,309
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
||
(1)
Financial information has been
retrospectively adjusted for the acquisition of Dolphin Films, Inc.
See Notes 1 and 4.
|
|
|
|
|
|
|
Additional
|
|
|
Total
|
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Noncontrolling
|
Accumulated
|
Stockholders
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
interest
|
Deficit
|
Deficit
|
|
|
|
|
|
|
|
|
|
Balance December
31, 2014
|
4,343,000
|
$
232,043
|
2
,047,309
|
$
30,710
|
$
26,510,949
|
$
2,995,249
|
$
(53,761,626
)
|
$
(23,992,675
)
|
Net loss for the year ended December
31, 2015
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,836,362
)
|
(8,836,362
)
|
Income attributable to the
noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
17,440
|
(17,440
)
|
-
|
Return of capital to
noncontrolling member
|
-
|
-
|
-
|
-
|
-
|
(34,881
)
|
-
|
(34,881
)
|
Balance December
31, 2015
|
4,343,000
|
$
232,043
|
2,047,309
|
$
30,710
|
$
26,5
10,949
|
$
2,977,808
|
$
(62,615,428
)
|
$
(32,863,918
)
|
Net loss for the year ended December
31, 2016
|
-
|
-
|
-
|
-
|
-
|
-
|
(37,189,679
)
|
(37,189,679
)
|
Income attributable to the
noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
7,097
|
(7,097
)
|
-
|
Return of capital to
noncontrolling member
|
-
|
-
|
-
|
-
|
-
|
(14,200
)
|
-
|
(14,200
)
|
Acquisition of 25%
interest in Dolphin Kids Clubs LLC
|
-
|
-
|
-
|
-
|
(921,122
)
|
(2,970,705
)
|
-
|
(3,891,827
)
|
Issuance of common
stock during the year ended December 31, 2016
|
-
|
-
|
187,572
|
2,814
|
1,872,189
|
-
|
-
|
1,875,003
|
Extinguishment of debt
at a price of $5.00
|
-
|
-
|
3
,078,980
|
46,185
|
37,236,639
|
-
|
-
|
37,282,824
|
Issuance of common
stock for convertible debt
|
|
|
316,400
|
4
,746
|
3,159,254
|
|
|
3,164,000
|
Preferred stock
dividend related to exchange of Series A for Series B Preferred
Stock
|
1,000,000
|
100,000
|
-
|
-
|
(5,227,247
)
|
-
|
-
|
(5,127,247
)
|
Issuance and conversion
of Series B Preferred
|
(3,300,000
)
|
(330,000
)
|
1
,567,500
|
2
3,513
|
6,246,734
|
-
|
-
|
5,940,247
|
Retirement of Series A
Preferred
|
(1,043,000
)
|
(1,043
)
|
-
|
-
|
(1,041,957
)
|
-
|
-
|
(1,043,000
)
|
Balance December 31,
2016
|
1,000,000
|
$
1,000
|
7,197,761
|
$
107,968
|
$
67,835,439
|
$
-
|
$
(99,812,204
)
|
$
(31,867,797
)
|
(1)
Financial information has been
retrospectively adjusted for the acquisition of Dolphin Films, Inc.
See Notes 1 and 4.
|
|
|
Depreciation/
|
|
|
Amortization
|
Asset
Category
|
|
Period
|
F Furniture and
fixtures
|
|
5
Years
|
Computer
equipment
|
|
3
Years
|
Leasehold
improvements
|
|
5
Years
|
Level
1 —
|
Inputs are quoted
prices in active markets for identical assets or liabilities as of
the reporting date.
|
Level
2 —
|
Inputs other than
quoted prices included within Level 1, such as quoted prices for
similar assets and liabilities in active markets; quoted prices for
identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated
with observable market data.
|
Level
3 —
|
Unobservable inputs
that are supported by little or no market activity and that are
significant to the fair value of the assets and liabilities. This
includes certain pricing models, discounted cash flow
methodologies, and similar techniques that use significant
unobservable inputs. Unobservable inputs for the asset or liability
that reflect management’s own assumptions about the
assumptions that market participants would use in pricing the asset
or liability as of the reporting date.
|
|
1)
|
|
Dolphin Digital
Media (USA): The Company created online kids clubs and derives
revenue from annual membership fees.
|
|
|
|
|
|
2)
|
|
Dolphin Digital
Studios: Dolphin Digital Studios creates original programming that
premieres online, with an initial focus on content geared toward
tweens and teens. The Company derived a majority of its revenues
from this segment during the year ended December 31,
2015.
|
|
|
|
|
|
3)
|
|
Dolphin Films:
Dolphin Films produces motion pictures, with an initial focus on
family content. The motion pictures are distributed,
through third parties, in the domestic and international
markets. The Company derived a majority of its revenues
from this segment during the year ended December 31,
2016.
|
|
Issuance
Date
|
Number of Common
Shares
|
Initial Per
Share Exercise Price
|
Initial Term
(Years)
|
Expiration
Date
|
Series
G Warrants
|
November 4,
2016
|
750,000
|
$
10.00
|
1.2
|
January 31,
2018
|
Series
H Warrants
|
November 4,
2016
|
250,000
|
$
12.00
|
2.2
|
January 31,
2019
|
Series
I Warrants
|
November 4,
2016
|
250,000
|
$
14.00
|
3.2
|
January 31,
2020
|
Series
J Warrants
|
December 29,
2016
|
1,085,000
|
$
0.03
|
4
|
December 29,
2020
|
Series
K Warrants
|
December 29,
2016
|
85,000
|
$
0.03
|
4
|
December 29,
2020
|
|
As of December 31,
2016
|
||||
Inputs
|
Series
G
|
Series
H
|
Series
I
|
Series
J
|
Series
K
|
Volatility
(1)
|
63.6
%
|
79.1
%
|
70.8
%
|
65.8
%
|
65.8
%
|
Expected term
(years)
|
1.08
|
2.08
|
3.08
|
4
|
4
|
Risk free interest
rate
|
.879
%
|
1.223
%
|
1.489
%
|
1.699
%
|
1.699
%
|
Common stock
price
|
$
12.00
|
$
12.00
|
$
12.00
|
$
12.00
|
$
12.00
|
Exercise
price
|
$
10.00
|
$
12.00
|
$
14.00
|
$
0.03
|
$
0.03
|
|
Max Steel
Productions LLC
As of and for the
years ended December 31,
|
JB Believe
LLC
As of and for the
years ended December 31,
|
||
(in
USD)
|
2016
|
2015
|
2016
|
2015
|
Assets
|
12,327,887
|
18,295,633
|
240,269
|
143,549
|
Liabilities
|
(15,922,552
)
|
(19,113,335
)
|
(7,014,098
)
|
(6,655,335
)
|
Revenues
|
9,233,520
|
-
|
133,331
|
101,555
|
Expenses
|
(11,627,444
)
|
(677,339
)
|
(395,374
)
|
(398,959
)
|
|
|
Weighted
|
|
|
Avg.
|
|
|
Exercise
|
Warrants:
|
Shares
|
Price
|
Balance at December
31, 2015
|
525,000
|
$
6.90
|
Issued
|
2,420,000
|
5.80
|
Exercised
|
—
|
—
|
Expired
|
—
|
—
|
Balance at December
31, 2016
|
2,945,000
|
$
5.98
|
Warrants:
|
Number of
Shares
|
Exercise
Price
|
Fair Value as of
December 31, 2016
|
Expiration
Date
|
Warrant
“G”
|
750,000
|
$
10.00
|
$
3,300,671
|
January 31,
2018
|
Warrant
“H”
|
250,000
|
$
12.00
|
$
1,524,805
|
January 31,
2019
|
Warrant
“I”
|
250,000
|
$
14.00
|
$
1,568,460
|
January 31,
2020
|
|
1,250,000
|
|
$
6,393,936
|
|
Warrant:
|
Number of
Shares
|
Exercise
Price
|
Fair Value as of
December 31, 2016
|
Expiration Date
|
Warrant
“J”
|
1,085,000
|
$
0.03
|
$
12,993,342
|
December 29,
2020
|
Warrant
“K”
|
85,0000
|
$
0.03
|
$
1,017,912
|
December 29,
2020
|
|
1,170,000
|
|
$
14,011,254
|
|
Warrant
|
Number of
shares
|
Exercise
price
|
Expiration
|
Warrant
E
|
175,000
|
$
0.44
|
December 31,
2018
|
Warrant
F
|
175,000
|
$
10.00
|
December 31,
2018
|
Warrant
G
|
750,000
|
$
10.00
|
January 31,
2018
|
Warrant
H
|
250,000
|
$
12.00
|
January 31,
2019
|
Warrant I
|
250,000
|
$
14.00
|
January 31,
2020
|
|
December
31,
|
|
|
2016
|
2015
|
Current income tax
expense (benefit)
|
|
|
Federal
|
$
-
|
$
-
|
State
|
-
|
-
|
|
$
-
|
$
-
|
Deferred income tax
expense (benefit)
|
|
|
Federal
|
$
(10,854,954
)
|
$
(1,354,370
)
|
State
|
(817,631
)
|
(202,112
)
|
|
$
(11,259,911
)
|
$
(1,556,482
)
|
Change in valuation
allowance (benefit)
|
|
|
Federal
|
$
10,854,954
|
$
1,354,370
|
State
|
817,631
|
202,112
|
|
11,259,911
|
1,556,482
|
Income tax
expense
|
$
-
|
$
-
|
|
2016
|
2015
|
Federal statutory
tax rate
|
(34.0
)%
|
(34.0
)%
|
Permanent items
affecting tax rate
|
4.9
%
|
0.8
%
|
State income taxes,
net of federal income tax benefit
|
(2.2
)%
|
(3.3
)%
|
Change in Deferred
Rate
|
0.2
%
|
(1.2
)%
|
Return to Provision
Adjustment
|
(0.1
)%
|
0.2
%
|
Miscellaneous
items
|
(0.2
)%
|
(1.0
)%
|
Change in valuation
allowance
|
31.4
%
|
38.5
%
|
Effective tax
rate
|
0.00
%
|
0.00
%
|
2017
|
$
243,269
|
2018
|
184,820
|
2019
|
110,446
|
Total
|
$
538,535
|
D
OLPHIN ENTERTAINMENT, INC. AND
SUBSIDIARIES
|
||
Condensed Consolidated Balance Sheets
|
||
(unaudited)
|
||
|
||
ASSETS
|
As
of
June
30,
2017
|
As
of
December
31,
2016
|
Current
|
|
|
Cash
and cash equivalents
|
$
1,071,813
|
$
662,546
|
Restricted
cash
|
-
|
1,250,000
|
Accounts
receivable, net of $251,000 of allowance for doubtful
accounts
|
5,992,899
|
3,668,646
|
Other
current assets
|
511,920
|
2,665,781
|
Total
Current Assets
|
7,576,632
|
8,246,973
|
Capitalized
production costs
|
2,626,461
|
4,654,013
|
Intangible
assets, net of $249,333 of amortization
|
8,860,667
|
-
|
Goodwill
|
14,336,919
|
-
|
Property,
equipment and leasehold improvements
|
1,071,706
|
35,188
|
Investments
|
220,000
|
-
|
Deposits
|
852,509
|
1,261,067
|
Total
Assets
|
$
35,544,894
|
$
14,197,241
|
LIABILITIES
|
|
|
Current
|
|
|
Accounts
payable
|
$
1,627,478
|
$
677,249
|
Other
current liabilities
|
4,973,500
|
2,958,523
|
Line
of credit
|
750,000
|
-
|
Put
Rights
|
750,343
|
-
|
Warrant
liability
|
-
|
14,011,254
|
Accrued
compensation
|
2,375,000
|
2,250,000
|
Debt
|
12,892,544
|
18,743,069
|
Loan
from related party
|
1,818,659
|
684,326
|
Deferred
revenue
|
20,303
|
46,681
|
Note
payable
|
850,000
|
300,000
|
Total
current liabilities
|
26,057,827
|
39,671,102
|
Noncurrent
|
|
|
Warrant
liability
|
4,170,677
|
6,393,936
|
Put
Rights
|
3,149,657
|
-
|
Contingent
consideration
|
3,743,000
|
-
|
Note
payable
|
400,000
|
-
|
Other
noncurrent liabilities
|
1,048,293
|
-
|
Total
noncurrent liabilities
|
12,511,627
|
6,393,936
|
Total
Liabilities
|
38,569,454
|
46,065,038
|
STOCKHOLDERS' DEFICIT
|
|
|
Common
stock, $0.015 par value, 200,000,000 shares authorized, 9,345,396
and 7,197,761, respectively, issued and outstanding at June 30,
2017 and December 31, 2016.
|
140,181
|
107,966
|
Preferred
Stock, Series C, $0.001 par value, 50,000, 50,000 at June 30, 2017
and December 31, 2016
|
1,000
|
1,000
|
Additional
paid in capital
|
93,243,840
|
67,835,441
|
Accumulated
deficit
|
(96,409,581
)
|
(99,812,204
)
|
Total
Stockholders' Deficit
|
$
(3,024,560
)
|
$
(31,867,797
)
|
Total
Liabilities and Stockholders' Deficit
|
$
35,544,894
|
$
14,197,241
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
D
OLPHIN ENTERTAINMENT INC. AND
SUBSIDIARIES
|
||||
Condensed Consolidated Statements of Operations
|
||||
(Unaudited)
|
||||
|
||||
|
For the
three months ended
|
For the
six months ended
|
||
|
June
30
|
June
30
|
||
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Revenues:
|
|
|
|
|
Production
and distribution
|
$
2,694,096
|
$
4,000
|
$
3,226,962
|
$
4,157
|
Entertainment
Publicity
|
5,137,556
|
-
|
5,137,556
|
-
|
Membership
|
-
|
3,750
|
-
|
21,028
|
Total
revenues
|
7,831,652
|
7,750
|
8,364,518
|
25,185
|
|
|
|
|
|
Expenses:
|
|
|
|
|
Direct
costs
|
2,070,529
|
-
|
2,500,772
|
2,429
|
Distribution
and marketing
|
559,210
|
-
|
629,493
|
-
|
Payroll
|
3,466,157
|
363,756
|
3,802,511
|
751,202
|
Selling,
general and administrative
|
1,020,807
|
523,014
|
1,213,400
|
562,576
|
Legal
and professional
|
621,369
|
394,358
|
997,434
|
967,531
|
Total
Expenses
|
7,738,072
|
1,281,128
|
9,143,610
|
2,283,738
|
Income
(Loss) before other expenses
|
93,580
|
(1,273,378
)
|
(779,092
)
|
(2,258,553
)
|
|
|
|
|
|
Other
Income (Expenses):
|
|
|
|
|
Other
Income (Expenses)
|
(16,000
)
|
-
|
(16,000
)
|
9,660
|
Amortization
of intangible assets
|
(249,333
)
|
-
|
(249,333
)
|
-
|
Loss
on extinguishment of debt
|
(4,167
)
|
(4,652,443
)
|
(4,167
)
|
(5,843,811
)
|
Acquisition
costs
|
(207,564
)
|
-
|
(745,272
)
|
-
|
Change
in fair value of warrant liability
|
(533,812
)
|
-
|
6,289,513
|
-
|
Change
in fair value of put rights
|
(100,000
)
|
-
|
(100,000
)
|
-
|
Loss
on disposal of furniture, office equipment and leasehold
improvements
|
(28,025
)
|
-
|
(28,025
)
|
-
|
Change
in fair value of contingent consideration
|
(116,000
)
|
-
|
(116,000
)
|
-
|
Interest
expense
|
(396,864
)
|
(1,778,111
)
|
(849,001
)
|
(3,155,076
)
|
Net
Income (Loss)
|
(1,558,185
)
|
(7,703,932
)
|
3,402,623
|
(11,247,780
)
|
|
|
|
|
|
Net
income attributable to noncontrolling interest
|
$
-
|
$
937
|
$
-
|
$
5,257
|
Net
loss attributable to Dolphin Entertainment,
Inc.
|
(1,558,185
)
|
(7,704,869
)
|
3,402,623
|
(11,253,037
)
|
Net
Income (Loss)
|
$
(1,558,185
)
|
$
(7,703,932
)
|
$
3,402,623
|
$
(11,247,780
)
|
|
|
|
|
|
Income
(Loss) per Share:
|
|
|
|
|
Basic
|
$
(0.17
)
|
$
(2.10
)
|
$
0.41
|
$
(5.45
)
|
Diluted
|
$
(0.17
)
|
$
(2.10
)
|
$
(0.30
)
|
$
(5.45
)
|
Weighted
average number of shares used in per share
calculation
|
|
|
|
|
Basic
|
9,336,389
|
3,670,471
|
8,293,343
|
3,025,448
|
Diluted
|
9,336,389
|
3,670,471
|
9,542,846
|
3,025,448
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
D
OLPHIN ENTERTAINMENT, INC. AND
SUBSIDIARIES
|
||
Condensed
Consolidated Statements of Cash Flows
|
||
(Unaudited)
|
||
|
||
|
For the six
months ended June 30,
|
|
|
2017
|
2016
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net income
(loss)
|
$
3,402,623
|
$
(11,247,780
)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
Depreciation
|
77,977
|
11,316
|
Amortization of
intangible assets
|
249,333
|
-
|
Amortization of
capitalized production costs
|
2,049,913
|
-
|
Impairment of
capitalized production costs
|
-
|
2,439
|
Loss on
extinguishment of debt
|
4,167
|
5,843,811
|
Loss on disposal of
fixed assets
|
28,024
|
-
|
Bad
debt
|
16,000
|
-
|
Change in fair
value of warrant liability
|
(6,289,513
)
|
-
|
Change in fair
value of put rights
|
100,000
|
-
|
Change in fair
value of contingent consideration
|
116,000
|
-
|
Change in deferred
rent
|
434,353
|
-
|
Changes in
operating assets and liabilities:
|
|
-
|
Accounts
receivable
|
(633,609
)
|
870,550
|
Other current
assets
|
2,153,861
|
-
|
Prepaid
expenses
|
-
|
69,766
|
Capitalized
production costs
|
(22,361
)
|
(123,177
)
|
Deposits
|
454,121
|
-
|
Deferred
revenue
|
(26,378
)
|
-
|
Accrued
compensation
|
125,000
|
60,000
|
Accounts
payable
|
883,137
|
(1,370,875
)
|
Other current
liabilities
|
(355,923
)
|
3,597,441
|
Other noncurrent
liabilities
|
(41,120
)
|
-
|
Net Cash Provided
by (Used in) Operating Activities
|
2,725,605
|
(2,286,509
)
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Restricted
cash
|
1,250,000
|
-
|
Purchase of fixed
assets
|
(54,558
)
|
-
|
Acquisition of
42West, net of cash acquired
|
13,626
|
-
|
Net Cash Provided
by Investing Activities
|
1,209,068
|
-
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Proceeds from loan
and security agreements
|
-
|
(405,000
)
|
Repayment of loan
and security agreements
|
-
|
-
|
Sale of common
stock
|
500,000
|
6,225,000
|
Proceeds from line
of credit
|
750,000
|
-
|
Proceeds from note
payable
|
950,000
|
-
|
Repayment of
debt
|
(5,850,525
)
|
-
|
Proceeds from the
exercise of warrants
|
35,100
|
-
|
Exercise of put
rights
|
(700,000
)
|
-
|
Advances from
related party
|
1,297,000
|
-
|
Repayment to
related party
|
(506,981
)
|
(961,324
)
|
Net Cash Provided
by (Used in) Financing Activities
|
(3,525,406
)
|
4,858,676
|
NET INCREASE IN
CASH AND CASH EQUIVALENTS
|
409,267
|
2,572,167
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
662,546
|
2,392,685
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
$
1,071,813
|
$
4,964,852
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
Interest
paid
|
$
3,333
|
$
749,249
|
SUPPLEMENTAL DISCLOSURES OF NON CASH FLOW
INFORMATION:
|
|
|
Conversion of
related party debt and interest to shares of common
stock
|
$
-
|
$
3,073,410
|
Conversion of debt
into shares of common stock
|
$
-
|
$
3,164,000
|
Conversion of loan
and security agreements, including interest, into shares of common
stock
|
$
-
|
$
20,434,858
|
Issuance of shares
of Common Stock related to the 42West
Acquisition
|
$
15,030,767
|
$
-
|
Liability for
contingent consideration for the 42West
Acquisition
|
$
3,743,000
|
$
-
|
Liability for put
rights to the Sellers of 42West
|
$
3,900,000
|
$
-
|
Liabilities assumed
in the 42West Acquisition
|
$
1,011,000
|
$
-
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
D
OLPHIN ENTERTAINMENT, INC AND
SUBSIDIARIES
|
|||||||
Condensed
Consolidated Statements of Changes in Stockholders'
Deficit
|
|||||||
For
the six months ended June 30, 2017
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Total
|
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Accumulated
|
Stockholders
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
|
|
|
|
|
|
|
|
Balance
December 31, 2016
|
1,000,000
|
$
1,000
|
7,197,761
|
$
107,966
|
$
67,835,441
|
$
(99,812,204
)
|
$
(31,867,797
)
|
Net income
for the six months ended June 30, 2017
|
-
|
-
|
-
|
-
|
-
|
3,402,623
|
3,402,623
|
Sale
of common stock during the six months ended June 30,
2017
|
-
|
-
|
50,000
|
750
|
499,250
|
-
|
500,000
|
Issuance
of shares from partial exercise of Warrant E and exercise of all of
Warrants J and K
|
-
|
-
|
1,332,885
|
19,993
|
9,960,107
|
-
|
9,980,100
|
Issuance
of shares for payment of services
|
|
|
3,254
|
49
|
34,118
|
|
34,167
|
Issuance
of shares related to acquisition of 42West
|
-
|
-
|
837,415
|
12,562
|
15,613,785
|
-
|
15,626,347
|
Shares
retired from exercise of puts
|
|
|
(75,919
)
|
(1,139
)
|
(698,861
)
|
|
(700,000
)
|
Balance
June 30, 2017
|
1,000,000
|
$
1,000
|
9,345,396
|
$
140,181
|
$
93,243,840
|
$
(96,409,581
)
|
$
(3,024,560
)
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
|
Depreciation/
|
|
Amortization
|
Asset
Category
|
Period
(Years)
|
Furniture and fixtures
|
5 - 7
|
Computer
and office equipment
|
3 - 5
|
Leasehold
improvements
|
5 – 8, not to
exceed the lease terms
|
Level 1
—
|
Inputs are quoted
prices in active markets for identical assets or liabilities as of
the reporting date.
|
Level 2
—
|
Inputs other than
quoted prices included within Level 1, such as quoted prices for
similar assets and liabilities in active markets; quoted prices for
identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated
with observable market data.
|
Level 3
—
|
Unobservable inputs
that are supported by little or no market activity and that are
significant to the fair value of the assets and liabilities. This
includes certain pricing models, discounted cash flow
methodologies, and similar techniques that use significant
unobservable inputs. Unobservable inputs for the asset or liability
that reflect management’s own assumptions about the
assumptions that market participants would use in pricing the asset
or liability as of the reporting date.
|
|
1)
|
|
Dolphin Digital
Media (USA): The Company created online kids clubs and derives
revenue from annual membership fees.
|
|
|
|
|
|
2)
|
|
Dolphin Digital
Studios: Dolphin Digital Studios creates original programming that
premieres online, with an initial focus on content geared toward
tweens and teens.
|
|
|
|
|
|
3)
|
|
Dolphin Films:
Dolphin Films produces motion pictures, with an initial focus on
family content. The motion pictures are distributed, through third
parties, in the domestic and international markets. The Company
derived all of its revenues from this segment during the three and
six months ended June 30, 2017.
|
Common Stock issued
at closing and in April 2017 (787,415 shares)
|
$
6,693,028
|
Common Stock
issuable on January 2, 2018 (980,911 shares)
|
8,337,739
|
Contingent
Consideration
|
3,627,000
|
Put
Rights
|
3,800,000
|
Sellers’
transaction costs paid at closing
|
260,000
|
Sellers’ tax
liabilities assumed
|
786,000
|
Working capital
adjustment
|
595,582
|
|
$
24,099,349
|
Cash
|
$
273,625
|
Accounts
receivable
|
1,706,644
|
Property, equipment
and leasehold improvements
|
1,087,962
|
Other
assets
|
265,563
|
Indemnification
asset
|
300,000
|
Intangible
assets
|
9,110,000
|
Total identifiable
assets acquired
|
12,743,794
|
|
|
Accounts payable
and accrued expenses
|
(731,475
)
|
Line of credit and
note payable
|
(1,025,000
)
|
Settlement
liability
|
(300,000
)
|
Other
liabilities
|
(902,889
)
|
Tax
liabilities
|
(22,000
)
|
Total liabilities
assumed
|
(2,981,364
)
|
Net identifiable
assets acquired
|
9,762,430
|
Goodwill
|
14,336,919
|
Net assets
acquired
|
$
24,099,349
|
|
For the three
months ended June 30, 2017
|
For the six months
ended June 30, 2017
|
Revenue
|
$
5,137,556
|
$
5,137,556
|
Net
income
|
244,764
|
244,764
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenues
|
$
7,831,652
|
$
4,550,913
|
$
13,054,074
|
$
9,476,356
|
Net income
(loss)
|
(1,381,361
)
|
(7,794,338
)
|
4,542,982
|
(10,582,396
)
|
Earnings (Loss) per
share:
|
|
|
|
|
Weighted average
shares - Basic
|
9,321,162
|
4,411,833
|
8,661,185
|
3,776,877
|
Weighted average
shares – Fully diluted
|
9,321,162
|
4,411,833
|
9,910,688
|
3,776,877
|
Loss per share -
Basic
|
$
(0.15
)
|
$
(1.77
)
|
$
0.52
|
$
(4.19
)
|
Loss per share
– Fully diluted
|
$
(0.15
)
|
$
(1.77
)
|
$
(0.18
)
|
$
(4.19
)
|
|
March
31, 2017
(As
initially reported)
|
Measurement
Period Adjustments
|
June 30,
2017 (As adjusted)
|
Cash
|
$
273,625
|
$
-
|
$
273,625
|
Accounts
receivable
|
1,706,644
|
-
|
1,706,644
|
Property, equipment
and leasehold improvements
|
1,087,962
|
-
|
1,087,962
|
Other
assets
|
265,563
|
-
|
265,563
|
Indemnification
asset
|
-
|
300,000
|
300,000
|
Intangible
assets
|
9,110,000
|
-
|
9,110,000
|
Total identifiable
assets acquired
|
12,443,794
|
300,000
|
12,743,794
|
|
|
|
|
Accounts payable
and accrued expenses
|
(731,475
)
|
-
|
(731,475
)
|
Line of credit and
note payable
|
(1,025,000
)
|
-
|
(1,025,000
)
|
Settlement
liability
|
(300,000
)
|
-
|
(300,000
)
|
Other
liabilities
|
(902,889
)
|
-
|
(902,889
)
|
Tax
liabilities
|
(22,000
)
|
-
|
(22,000
)
|
Total liabilities
assumed
|
(2,981,364
)
|
-
|
(2,981,364
)
|
Net identifiable
assets acquired
|
9,462,430
|
-
|
9,762,430
|
Goodwill
|
13,996,337
|
340,582
|
14,336,919
|
Net assets
acquired
|
$
23,458,767
|
$
640,582
|
$
24,099,349
|
Goodwill
originally reported at March 31, 2017
|
$
13,996,337
|
Changes
to estimated fair values:
|
|
Contingent
Consideration
|
86,000
|
Put
Rights
|
(200,000
)
|
Sellers’
tax liabilities assumed
|
159,000
|
Working
capital adjustment
|
595,582
|
Indemnification
asset
|
(300,000
)
|
|
340,582
|
Adjusted
goodwill
|
$
14,336,919
|
|
June 30,
2017
|
December
31, 2016
|
Furniture
and fixtures
|
$
531,255
|
$
65,311
|
Computers
and equipment
|
308,422
|
41,656
|
Leasehold
improvements
|
352,644
|
7,649
|
|
1,192,321
|
114,616
|
Less:
accumulated depreciation
|
(120,615
)
|
(79,428
)
|
|
$
1,071,706
|
$
35,188
|
|
Issuance
Date
|
Number of Common
Shares
|
Per Share
Exercise Price
|
Remaining Term
(Months)
|
Expiration
Date
|
Series G
Warrants
|
November 4,
2016
|
750,000
|
$9.22
|
7
|
January 31,
2018
|
Series H
Warrants
|
November 4,
2016
|
250,000
|
$9.22
|
19
|
January 31,
2019
|
Series I
Warrants
|
November 4,
2016
|
250,000
|
$9.22
|
31
|
January 31,
2020
|
|
As of June 30,
2017
|
||
Inputs
|
Series
G
|
Series
H
|
Series
I
|
Volatility
(1)
|
63.8
%
|
59.2
%
|
77.2
%
|
Expected term
(years)
|
0.58
|
1.58
|
2.58
|
Risk free interest
rate
|
1.157
%
|
1.322
%
|
1.479
%
|
Common stock
price
|
$
10.00
|
$
10.00
|
$
10.00
|
Exercise
price
|
$
9.22
|
$
9.22
|
$
9.22
|
|
Warrants
“G”,
“H” and “I”
|
Warrants
“J”
and “K”
|
Total
|
Beginning fair
value balance reported in the consolidated balance sheet at
December 31, 2016
|
$
6,393,936
|
$
14,011,254
|
$
20,405,190
|
Change in fair
value (gain) reported in the statements of
operations
|
(2,223,259
)
|
(4,066,254
)
|
(6,289,513
)
|
Exercise of
“J” and “K” Warrants
|
-
|
(9,945,000
)
|
(9,945,000
)
|
Ending fair value
balance reported in the condensed consolidated balance sheet at
June 30, 2017
|
$
4,170,677
|
$
-
|
$
4,170,677
|
|
|
On the date of
Acquisition
(March 30,
2017)
|
|
As
of
June 30,
2017
|
||
Inputs
|
|
|
|
|
||
Equity Volatility
estimate
|
|
75%
|
|
92.5%
|
||
Discount rate based
on US Treasury obligations
|
|
0.12% -
1.70%
|
|
0.90% -
1.61%
|
Beginning fair
value balance on the Acquisition Date (March 30,
2017)
|
$
3,800,000
|
Change in fair
value (loss) reported in the statements of
operations
|
100,000
|
Ending fair value
balance reported in the condensed consolidated balance sheet at
June 30, 2017
|
$
3,900,000
|
|
|
On the date of
Acquisition
(March 30,
2017)
|
|
As
of
June 30,
2017
|
Inputs
|
|
|
|
|
Risk Free Discount
Rate (based on US government treasury obligation with a term
similar to that of the Contingent
Consideration)
|
|
1.03%
-1.55%
|
|
1.14% -
1.47%
|
Annual Asset
Volatility Estimate
|
|
72.5%
|
|
90%
|
Estimated
EBITDA
|
|
$3,600,000 -
$3,900,000
|
|
$3,600,000 -
$3,900,000
|
Beginning fair
value balance on the Acquisition Date (March 30,
2017)
|
$
3,627,000
|
Change in fair
value (loss) reported in the statements of
operations
|
116,000
|
Ending fair value
balance reported in the condensed consolidated balance sheet at
June 30, 2017
|
$
3,743,000
|
|
Max Steel Productions LLC
|
JB Believe LLC
|
||||||||
(in
USD)
|
As of and for the
six months ended
June 30, 2017
|
As of and
for the three
months
ended June
30, 2017
|
As of
December 31,
2016
|
As of and
for the six
months ended
June 30, 2016
|
As of and for
the three
months
ended June
30, 2016
|
As of and
for the six
months ended
June 30, 2017
|
As of and
for the
three
months
ended June
30, 2017
|
As of
December 31,
2016
|
As of and for
the six months
ended June 30,
2016
|
As of and for
the three
months ended
June 30, 2016
|
Assets
|
9,207,664
|
9,207,664
|
12,327,887
|
n/a
|
zn/a
|
30,843
|
30,843
|
240,269
|
n/a
|
n/a
|
Liabilities
|
(13,011,741)
|
(13,011,741)
|
(15,922,552)
|
n/a
|
n/a
|
(6,755,328)
|
(6,755,328)
|
(7,014,098)
|
n/a
|
n/a
|
Revenues
|
3,173,826
|
2,656,523
|
n/a
|
-
|
-
|
53,136
|
37,573
|
n/a
|
3,786
|
3,786
|
Expenses
|
(3,383,238)
|
(2,236,428)
|
n/a
|
(541,731)
|
(325,024)
|
(3,792)
|
-
|
n/a
|
(260,592)
|
(133,711)
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Numerator:
|
|
|
|
|
Net income
(loss)
|
$
(1,558,185
)
|
$
(7,703,932
)
|
$
3,402,623
|
$
(11,247,780
)
|
Preferred stock
deemed dividend
|
-
|
-
|
-
|
(5,227,247
)
|
Numerator for basic
income (loss) per share
|
(1,588,185
)
|
(7,703,932
)
|
3,402,623
|
(16,475,027
)
|
Change in fair
value of Warrants “J” and “K” (note
12)
|
-
|
-
|
(6,289,513
)
|
-
|
Numerator for
diluted income (loss) per share
|
$
(1,558,185
)
|
$
(7,703,932
)
|
$
(2,886,890
)
|
$
(16,475,027
)
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Denominator for
basic EPS — weighted–average shares
|
9,336,389
|
3,670,471
|
8,293,343
|
3,025,448
|
Effect of dilutive
securities:
|
|
|
|
|
Warrants
|
-
|
-
|
756,338
|
-
|
Shares issuable in
January 2018 in connection with the 42West acquisition (Note
4)
|
-
|
-
|
493,165
|
-
|
Denominator for
diluted EPS — adjusted weighted-average shares assuming
exercise of warrants
|
9,336,389
|
3,670,471
|
9,542,846
|
3,025,448
|
|
|
|
|
|
Basic income (loss)
per share
|
$
(0.17
)
|
$
(2.10
)
|
$
0.41
|
$
(5.45
)
|
Diluted Income
(loss) per share
|
$
(0.17
)
|
$
(2.10
)
|
$
(0.30
)
|
$
(5.45
)
|
|
|
Weighted
|
|
|
Avg.
|
|
|
Exercise
|
Warrants:
|
Shares
|
Price
|
Balance at December
31, 2016
|
2,945,000
|
$
5.98
|
Issued
|
—
|
—
|
Exercised
|
1,332,885
|
1.28
|
Expired
|
—
|
—
|
Balance at June 30,
2017
|
1,612,115
|
$
9.28
|
Warrants:
|
Number of
Shares
|
Exercise price
at June 30, 2017
|
Original
Exercise Price
|
Fair Value as of
June 30, 2017
|
Fair Value as of
December 31, 2016
|
Expiration
Date
|
Warrant
“G”
|
750,000
|
$
9.22
|
$
10.00
|
$
1,938,202
|
$
3,300,671
|
January 31,
2018
|
Warrant
“H”
|
250,000
|
$
9.22
|
$
12.00
|
902,391
|
1,524,805
|
January 31,
2019
|
Warrant
“I”
|
250,000
|
$
9.22
|
$
14.00
|
1,330,084
|
1,568,460
|
January 31,
2020
|
|
1,250,000
|
|
|
$
4,170,677
|
$
6,393,936
|
|
Period ended June
30, 2017
|
|
July 1, 2017
– December 31, 2017
|
$
550,090
|
2018
|
1,308,209
|
2019
|
1,327,992
|
2020
|
1,433,403
|
2021
|
1,449,019
|
Thereafter
|
4,675,844
|
|
$
10,744,558
|
|
December
31,
|
|
|
2016
|
2015
|
Assets
|
|
|
Current
Assets:
|
|
|
Cash
|
$
1,279,056
|
$
2,161,073
|
Accounts receivable
(net of allowance for doubtful accounts of $184,000 and $165,000,
respectively)
|
1,337,806
|
1,168,921
|
Shares
receivable
|
-
|
220,000
|
Prepaid income
taxes
|
26,150
|
-
|
Total
Current Assets
|
2,643,012
|
3,549,994
|
Property,
Equipment and Leasehold Improvements, Net
|
1,115,515
|
785,733
|
Investments
|
220,000
|
-
|
Security
Deposits
|
45,563
|
45,563
|
Total
Assets
|
$
4,024,090
|
$
4,381,290
|
Liabilities
and Members’ Equity
|
|
|
Current
Liabilities:
|
|
|
Bank loans
payable
|
$
350,000
|
$
-
|
Current portion of
note payable to a former member
|
300,000
|
300,000
|
Accounts
payable
|
435,110
|
350,441
|
Accrued
expenses
|
261,053
|
712,792
|
Settlement accrual,
current portion
|
300,000
|
340,000
|
Income taxes
payable
|
-
|
94,817
|
Deferred rent,
current portion
|
47,774
|
112,477
|
Deferred landlord
reimbursement, current portion
|
98,501
|
98,501
|
Deferred tax
liability
|
1,000
|
13,000
|
Total
Current Liabilities
|
1,793,438
|
2,022,028
|
Long-Term
Liabilities:
|
|
|
Note payable to a
former member, net of current portion
|
225,000
|
525,000
|
Settlement accrual,
noncurrent portion
|
-
|
260,000
|
Deferred rent,
noncurrent portion
|
383,502
|
356,080
|
Deferred landlord
reimbursement, noncurrent portion
|
385,794
|
484,295
|
Total
Long-Term Liabilities
|
994,296
|
1,625,375
|
Total
Liabilities
|
2,787,734
|
3,647,403
|
Members’
Equity
|
1,236,356
|
733,887
|
Total
Liabilities and Members’ Equity
|
$
4,024,090
|
$
4,381,290
|
|
Year Ended December
31,
|
|
|
2016
|
2015
|
Revenue
|
$
18,563,749
|
$
19,769,891
|
Operating
Expenses
|
13,593,299
|
13,413,057
|
Operating
Income Before Guaranteed Payments, Expenses Billed to Clients and
Settlement Expense
|
4,970,450
|
6,356,834
|
Guaranteed
Payments
|
1,197,660
|
1,197,660
|
Expenses
Billed to Clients
|
1,234,064
|
1,633,701
|
Settlement
Expense
|
40,000
|
60,000
|
Operating
Income
|
2,498,726
|
3,465,473
|
Other
Expenses:
|
|
|
Loss on disposal of
equipment
|
-
|
43,138
|
Interest
expense
|
21,505
|
14,825
|
Total
Other Expenses
|
21,505
|
57,963
|
Income
before Provision for Income Taxes
|
2,477,221
|
3,407,510
|
Provision
for Income Taxes
|
59,752
|
225,140
|
Net
Income
|
$
2,417,469
|
$
3,182,370
|
|
Year
Ended December 31,
|
|
|
2016
|
2015
|
Members’
Equity, Beginning of Period
|
$
733,887
|
$
17,517
|
Net
income
|
2,417,469
|
3,182,370
|
Less:
Members’ distributions
|
(1,915,000
)
|
(2,466,000
)
|
Members’
Equity, End of Period
|
$
1,236,356
|
$
733,887
|
|
Year Ended December
31,
|
|
|
2016
|
2015
|
Cash
Flows From Operating Activities:
|
|
|
Net
income
|
$
2,417,469
|
$
3,182,370
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
213,846
|
211,794
|
Deferred
rent
|
(37,280
)
|
(51,901
)
|
Amortization of
landlord reimbursement
|
(98,501
)
|
(98,501
)
|
Loss on disposal of
equipment
|
-
|
43,138
|
Shares
receivable
|
-
|
(220,000
)
|
Changes in
operating assets and liabilities:
|
|
|
Accounts
receivable
|
(168,885
)
|
189,310
|
Accounts
payable
|
84,668
|
132,373
|
Accrued
expenses
|
(451,739
)
|
(118,642
)
|
Settlement
accrual
|
(300,000
)
|
60,000
|
Deferred
taxes
|
(12,000
)
|
22,000
|
Income taxes
payable/receivable
|
(120,967
)
|
55,699
|
Net
Cash Provided By Operating Activities
|
1,526,611
|
3,407,640
|
Cash
Flows From Investing Activities:
|
|
|
Purchase of
equipment and leasehold improvements
|
(543,628
)
|
(78,495
)
|
Net
Cash Used In Investing Activities
|
(543,628
)
|
(78,495
)
|
Cash
Flows From Financing Activities:
|
|
|
Repayment of note
payable to a former member
|
(300,000
)
|
(300,000
)
|
Proceeds from
revolving credit facility
|
350,000
|
-
|
Distributions
|
(1,915,000
)
|
(2,466,000
)
|
Net
Cash Used In Financing Activities
|
(1,865,000
)
|
(2,766,000
)
|
Net
(Decrease) Increase in Cash
|
(882,017
)
|
563,145
|
Cash,
Beginning of Period
|
2,161,073
|
1,597,928
|
Cash,
End of Period
|
$
1,279,056
|
$
2,161,073
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
Interest
|
$
21,505
|
$
14,825
|
Income
taxes
|
123,950
|
147,441
|
Supplemental
Disclosure of Noncash Investing Activities:
|
|
|
Conversion of
shares receivable
|
$
220,000
|
$
-
|
|
December
31,
2016
|
December
31,
2015
|
Furniture and
fixtures
|
$
611,893
|
$
234,195
|
Computers and
equipment
|
626,611
|
460,680
|
Leasehold
improvements
|
804,770
|
804,770
|
|
2,043,274
|
1,499,645
|
Less: Accumulated
depreciation
|
(927,759
)
|
(713,912
)
|
|
$
1,115,515
|
$
785,733
|
|
December
31,
2016
|
December
31,
2015
|
Bonuses
|
$
61,357
|
$
583,437
|
Commissions
|
151,000
|
73,316
|
Credit card
liabilities
|
-
|
30,318
|
Other accrued
expenses
|
48,696
|
25,721
|
|
$
261,053
|
$
712,792
|
|
December
31,
2016
|
December
31,
2015
|
The Virtual Reality
Company (“VRC”)
|
$
220,000
|
$
-
|
|
Year Ended December
31,
|
|
|
2016
|
2015
|
Current
|
$
71,252
|
$
203,140
|
Deferred
|
(12,000
)
|
22,000
|
|
$
59,752
|
$
225,140
|
|
|
|
|
December
31,
2016
|
December
31,
2015
|
Deferred tax
assets:
|
|
|
Effect of cash
basis accounting adjustments
|
$
54,000
|
$
34,000
|
Deferred tax
liabilities:
|
|
|
Effect of cash
basis accounting adjustments
|
(55,000
)
|
(47,000
)
|
Net deferred tax
liability
|
$
(1,000
)
|
$
(13,000
)
|
Period ended December 31,
|
|
2017
|
$
1,289,187
|
2018
|
1,303,478
|
2019
|
1,326,535
|
2020
|
1,433,403
|
2021
|
1,449,019
|
Thereafter
|
4,675,845
|
|
$
11,477,467
|
Maxim Group LLC
|
Ladenburg
Thalmann
|
Securities and
Exchange Commission Registration Fee
|
$
2,312.99
|
FINRA Filing
Fee
|
$
*
|
Accounting Fees and
Expenses
|
$
*
|
Legal Fees and
Expense
|
$
*
|
Transfer Agent and
Registrar Fee
|
$
*
|
Printing and
Engraving Expenses
|
$
*
|
Blue Sky Fees and
Expenses
|
$
*
|
Miscellaneous
|
$
*
|
Total
|
$
*
|
(1)
|
On
October 14, 2015, we entered into a merger agreement pursuant to
which we acquired Dolphin Films from Dolphin Entertainment,
LLC. Pursuant to the terms of the merger
agreement, upon consummation of the Dolphin Films acquisition on
March 7, 2016, we issued to Dolphin Entertainment, LLC
2,300,000 shares of Series B Convertible Preferred Stock and
1,000,000 shares of Series C Convertible Preferred Stock as
consideration. Our issuance of Series B and Series C Convertible
Preferred Stock was made in reliance upon the exemption from
registration requirements in Section 4(a)(2) of the Securities Act.
On November 15, 2016, Dolphin Entertainment, LLC
converted all of the shares of Series B Convertible Preferred Stock
into 1,092,500 shares of our common stock. Our
issuance of common stock to Dolphin Entertainment, LLC
upon conversion of the Series B Convertible Preferred Stock was
made, and any future issuances of Series C Convertible Preferred
Stock will be made, in reliance upon the exemption from
registration requirements in Section 3(a)(9) of the Securities
Act.
|
(2)
|
In
connection with the Dolphin Films acquisition, on October 16, 2015,
we entered into a preferred stock exchange agreement with T
Squared. Pursuant to the agreement, on March 7, 2016, we exchanged
1,042,753 previously issued shares of Series A Convertible
Preferred Stock for 1,000,000 newly issued shares of Series B
Convertible Preferred Stock. Our issuance of Series B Convertible
Preferred Stock was made in reliance upon the exemption from
registration requirements in Section 3(a)(9) of the Securities Act.
On November 16, 2016, T Squared converted all of the shares of
Series B Convertible Preferred Stock into 475,000
shares of our common stock.
|
(3)
|
On
December 7, 2015, we entered into a subscription agreement with an
investor pursuant to which we issued to the investor a convertible
note in the amount of $3,164,000. At any time prior to the maturity
date, the investor had the right, at its option, to convert some or
all of its convertible note into the number of shares of common
stock determined by dividing (a) the aggregate sum of the (i)
principal amount of the convertible note to be converted, and (ii)
amount of any accrued but unpaid interest with respect to such
portion of the convertible note to be converted; and (b) the
conversion price then in effect. The initial conversion price was
$10.00 per share, subject to adjustment. The
outstanding principal amount and all accrued interest of the
convertible note were to mandatorily and automatically convert into
common stock upon occurrence of a specified triggering
event. On February 5, 2016, a triggering event occurred and
the entire principal amount of the convertible note mandatorily and
automatically converted into 316,400 shares of common
stock.
|
(4)
|
On
March 4, 2016, we entered into a subscription agreement with
Dolphin Entertainment, LLC, holder of an outstanding
promissory note dated December 31, 2011. Pursuant to the
subscription agreement, Dolphin Entertainment, LLC
converted an aggregate amount of principal and interest outstanding
under the note of $3,073,410 into 307,341 shares of
common stock as payment in full of the note. Our issuance of
common stock to Dolphin Entertainment, LLC to satisfy
the note was made in reliance upon the exemption from registration
requirements in Section 3(a)(9) of the Securities Act.
|
(5)
|
On
March 29, 2016, we entered into ten individual subscription
agreements with each of ten subscribers. The subscribers were
holders of outstanding promissory notes issued pursuant to certain
loan and security agreements in 2014 and 2015. Pursuant to the
terms of the subscription agreements we converted the $2,883,377
aggregate amount of principal and interest outstanding under the
notes into an aggregate of 288,338 shares of common
stock at $10.00 per share as payment in
full of each of the notes. Our issuance of common stock to each of
the subscribers was made in reliance on Section 3(a)(9) of the
Securities Act.
|
(6)
|
On
April 1, 2016, we entered into substantially identical subscription
agreements with certain investors. Pursuant to the agreements, we
issued and sold to the investors in a private placement an
aggregate of 537,500 shares of common stock, at a
purchase price of $10.00 per share, which provided
$5,375,000 of aggregate gross proceeds to us. Under the
terms of the subscription agreements, each investor had the option
to purchase additional shares of common stock at the purchase
price, not to exceed the number of such investor’s initial
number of subscribed shares, during each of the second, third and
fourth quarters of 2016. We refer to such investors as quarterly
investors.
|
(7)
|
On May
31, 2016, we entered into substantially identical debt exchange
agreements with certain investors. Pursuant to the agreements, we
issued and sold to the investors in a private placement an
aggregate of 473,255 shares of our common stock in
exchange for the cancellation of an aggregate amount of
$4,732,545 in outstanding debt and interest under
certain notes held by the investors, at an exchange rate of
$10.00 per share.
|
(8)
|
On June
22, 2016, we entered into a subscription agreement with an investor
whereby we issued and sold to the investor in a private placement
an aggregate of 25,000 shares of our common stock at a
purchase price of $10.00 per share. The
private placement provided $250,000 of gross proceeds to
us.
|
(9)
|
On June
28, 2016, we received notice from a quarterly investor and $500,000
to exercise the option of purchasing shares of our common stock at
$10.00 per share. We issued 50,000 shares
of common stock related to this exercise.
|
(10)
|
On June
30, 2016, we entered into a subscription agreement with an
investor, pursuant to which we issued and sold to the investor in a
private placement an aggregate of 10,000 shares of
common stock at a price of $10.00 per share. The
private placement provided $100,000 of aggregate proceeds for
us.
|
(11)
|
On June
30, 2016, we entered into a web series debt exchange agreement with
a promissory noteholder with a principal amount of $50,000.
Pursuant to the agreement, we converted an aggregate of $55,640 of
principal and interest into 5,564 shares of common
stock at a price of $10.00 per share.
|
(12)
|
On June
30, 2016, we entered into substantially identical debt exchange
agreements with certain investors. Pursuant to the agreements, we
issued and sold to the investors in a private placement an
aggregate of 1,276,330 shares of our common stock in
exchange for the cancellation of an aggregate amount of
$12,763,295 in outstanding debt and interest under
certain notes held by the investors, at an exchange rate of
$10.00 per share.
|
(13)
|
On
October 3, 2016, we entered into a debt exchange agreement pursuant
to which we agreed to issue 6,000 shares of common
stock at an exchange price of $10.00 per share to
terminate the remaining kids club agreement for (i) $10,000 plus
(ii) the original investment of $50,000.
|
(14)
|
On
October 13, 2016, we received notice from a quarterly investor and
$600,000 to exercise the option of purchasing shares of our common
stock at $10.00 per share. We issued
60,000 shares of common stock related to this
exercise.
|
(15)
|
On
October 3, 2016, October 13, 2016 and October 27, 2016, we entered
into three substantially identical debt exchange agreements to
issue 33,100 shares of common stock at an exchange
price of $10.00 per share to terminate three equity
finance agreements for a cumulative original investment amount of
$331,000.
|
(16)
|
On
October 13, 2016, we entered into six substantially identical
subscription agreements, pursuant to which we issued
12,500 shares of common stock at $10.00
per share and received $125,000.
|
(17)
|
On
November 4, 2016, we entered into a warrant purchase agreement with
T Squared pursuant to which we issued the (i) Series G
Warrant to purchase up to 750,000 shares of common stock
at an exercise price of $10.00 per share of our
common stock, and an expiration date of January 31, 2018, (ii)
Series H Warrant to purchase up to 250,000 shares of common
stock at an exercise price of $12.00 per share
of common stock and an expiration date of January 31, 2019, and
(iii) Series I Warrant to purchase up to 250,000 shares of
common stock at an exercise price of $14.00 per
share of common stock and an expiration date of January 31, 2020.
As consideration for the Warrants, T Squared agreed to make a
$50,000 cash payment to us to reduce the aggregate exercise price
of the Series E Warrant to purchase up to 175,000 shares of
common stock that were issued to it on March
10, 2010 and amended on September 10, 2015 to extend their
expiration date until December 31, 2018.
|
(18)
|
On
November 15, 2016, we entered into a subscription agreement with an
investor, pursuant to which we issued and sold to such investor
50,000 shares of common stock at a price of
$10.00 per Share. This transaction provided $500,000
in proceeds for us.
|
(19)
|
On
November 17, 2016, we received notice from a quarterly investor and
$600,000 to exercise the option of purchasing shares of our common
stock at $10.00 per share. We issued
60,000 shares of common stock related to this
exercise.
|
(20)
|
On
November 22, 2016, we entered into a subscription agreement with an
investor pursuant to which we issued 5,000 shares of
common stock at $10.00 per share and received gross
proceeds in the amount of $50,000.
|
(21)
|
On
December 15, 2016 and December 20, 2016, we entered into two
separate subscription agreements with two individual subscribers.
The subscribers each held outstanding promissory notes of our
company, issued pursuant to certain loan and security agreements
dated January 15, 2015 and May 4, 2015, respectively. Pursuant to
the subscription agreements, we and each of the subscribers agreed
to convert their respective aggregate amounts of principal and
interest outstanding under the notes into shares of common stock.
On December 15, 2016, one of the subscribers converted the
principal balance of such subscriber’s notes together with
accrued interest, in the aggregate amount of
$1,154,245, into 115,425 shares of common
stock at $10.00 per share as payment in full of the
notes. On December 20, 2016, the other subscriber converted the
principal balance of such subscriber’s notes together with
accrued interest, in the aggregate amount of $111,285
into 11,129 shares of common stock at
$10.00 per share as payment in full of the
notes.
|
(22)
|
On
December 29, 2016, we and KCF Investments, LLC entered into (i) a
purchase agreement pursuant to which we purchased from KCF the
remaining 25% outstanding membership interests of Dolphin Kids Club
in exchange for the issuance of a common stock purchase warrant
exercisable for 300,000 shares of common stock and
(ii) a debt exchange agreement pursuant to which we exchanged an
aggregate principal amount of $6,470,990 owing under certain loan
and security agreements for a common stock purchase warrant
exercisable for 785,000 shares of common stock. In
connection with the agreements, we and KCF entered into a Common
Stock Purchase Warrant “J” Agreement pursuant to which
we agreed to issue to KCF an aggregate of up to
1,085,000 shares of common stock (as adjusted
from time to time as provided in the Warrant “J”
Agreement) with an initial exercise price of $0.03 per
share of common stock, and an expiration date of December 29,
2020.
In
addition, on December 29, 2016, we and BBCF 2011, LLC, an affiliate
of KCF, entered into a termination agreement pursuant to which we
agreed to terminate all of BBCF’s rights to profit
distributions from Dolphin Digital Studios arising under equity
finance agreements dated March 14, 2011 and June 29, 2011, in
exchange for the issuance of a common stock purchase warrant
exercisable for 85,000 shares of common stock. In connection with
the termination agreement, we and BBCF entered into a Common Stock
Purchase Warrant “K” Agreement pursuant to which the
Company agreed to issue to BBCF up to 85,000 shares of common
stock (as adjusted from time to time as provided in the Warrant
“K” Agreement) with an initial exercise price of $0.03
per share of common stock and an expiration date of December 29,
2020.
|
(23)
|
On
February 16, 2017, we entered into a subscription agreement with an
investor, pursuant to which we issued and sold to the investor
50,000 shares of common stock, at a purchase price of
$10.00 per share. We received $500,000 of
gross proceeds as a result of the sale of shares.
|
(24)
|
On
March 30, 2017, as consideration for our acquisition of
42West, we paid to the sellers approximately $18.7 million in
shares of common stock, par value $0.015, based on our
company’s 30-trading-day average stock price prior to the
closing date of $9.22 per share, as adjusted for
the 1-to-2 reverse stock split, (less certain working
capital and closing adjustments, transaction expenses and payments
of indebtedness), plus the potential to earn up to an additional
$9.3 million in shares of common stock. As a result, we (i) issued
615,140 shares of common stock on the closing date,
172,275 shares of common stock to certain 42West
employees on April 13, 2017 and 59,320
shares of common stock as employee stock bonuses on August
21, 2017 and (ii) will issue
980,911 shares of common stock on January 2, 2018. In
addition, we may issue up to 981,563 shares of common
stock based on the achievement of specified financial performance
targets over a three-year period as set forth in the Membership
Interest Purchase Agreement.
|
(25)
|
On
April 13, 2017, we issued 3,254 shares of common stock
to a consultant as consideration for services rendered during the
month of March 2017, valued at $30,000. The shares were
issued at a purchase price of $9.22 per share,
as adjusted for the 1-to-2 reverse stock split, based
on the 30-trading-day average stock price prior to March 30,
2017.
|
(26)
|
On July 18, 2017,
we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $250,000, at an interest rate of 10% per annum, which is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription
agreement.
|
(27)
|
On July 26, 2017,
we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $250,000, at an interest rate of 10% per annum, which is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription
agreement.
|
(28)
|
On August 1, 2017,
we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $25,000, at an interest rate of 10% per annum, that is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription
agreement.
|
(29)
|
On August 2, 2017,
we issued 2,886 shares of common stock at a price of $10.00 per
share to a third party in settlement of an outstanding account
receivable.
|
(30)
|
On August 4, 2017,
we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $50,000, at an interest rate of 10% per annum, that is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription
agreement.
|
(31) |
On August 31, 2017,
we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $50,000, at an interest rate of 10% per annum that is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription agreement.
|
(32) |
On September 6,
2017, we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $50,000, at an interest rate of 10% per annum that is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription agreement.
|
(33) |
On September 9,
2017, we entered into a subscription agreement with a subscriber,
pursuant to which we sold a convertible promissory note in the
amount of $50,000, at an interest rate of 10% per annum that is
convertible into shares of common stock in accordance with the
terms and conditions of the subscription agreement.
|
|
DOLPHIN ENTERTAINMENT, INC.
|
|
|
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|
|
|
|
By:
|
/s/ William
O’Dowd, IV
|
|
|
Name:
|
William
O’Dowd, IV
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
/s/
William O’Dowd, IV
|
|
Chairman,
President and Chief Executive Officer
(Principal
Executive Officer)
|
|
October 10,
2017
|
William
O’Dowd, IV
|
|
|
||
/s/
Mirta A Negrini
|
|
Chief
Financial and Operating Officer and Director
(Principal
Financial Officer)
|
|
October
10,
2017
|
Mirta A
Negrini
|
|
|
||
*
|
|
Director
|
|
October
10,
2017
|
Michael
Espensen
|
|
|
||
*
|
|
Director
|
|
October
10,
2017
|
Nelson
Famadas
|
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||
|
|
Director
|
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Allan
Mayer
|
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||
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Director
|
|
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Justo
Pozo
|
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||
*
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|
Director
|
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October
10,
2017
|
Nicholas
Stanham
|
|
|
*
|
By: /s/ Mirta A
Negrini
|
|
Name: Mirta A
Negrini
Title:
Attorney-in-fact
|
Exhibit
No.
|
|
Description
|
|
Incorporated by Reference
|
|
|
|
|
|
1.1
|
|
Underwriting
Agreement.**
|
|
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|
Agreement
and Plan of Merger
dated as of October
14, 2015,
by and among the
Company, DDM Merger Sub, Inc., Dolphin Films, Inc. and Dolphin
Entertainment, Inc.
|
|
Incorporated
herein by reference to Exhibit 2.2 to the Company’s Current
Report on Form 8-K, filed on October 19, 2015.
|
|
|
|
|
|
|
|
Membership
Interest Purchase Agreement, dated as of March 30, 2017, by and
among the Company and Leslee Dart, Amanda Lundberg, Allan Mayer and
The Beatrice B. Trust.*
|
|
Incorporated
herein by reference to Exhibit 2.2 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2016.
|
|
|
|
|
|
|
|
Amended
and Restated Articles of Incorporation of Dolphin
Digital Media, Inc.
|
|
Incorporated
herein by reference to Exhibit 3.1(a) to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2017.
|
|
|
|
|
|
|
3.1(b) |
|
Articles of Amendment to the Amended and Restated Articles of Incorporation of Dolphin Entertainment, Inc. |
|
Incorporated herein by reference to Exhibit 3.1(b) to the Company's Current Report on Form 8-K, filed on September 19, 2017. |
|
|
|
|
|
|
Bylaws
of Dolphin Digital Media, Inc. dated as of December 3,
2014.
|
|
Incorporated
herein by reference to Exhibit 3.2 to the Company’s Current
Report on Form 8-K, filed on December 9, 2014.
|
|
|
|
|
|
|
|
Registration
Rights Agreement, dated as of March 30, 2017; by and
among the Company and Leslee Dart, Amanda Lundberg, Allan Mayer and
the Beatrice B. Trust.
|
|
Incorporated
herein by reference to Exhibit 4.1 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2016.
|
|
|
|
|
|
|
|
Warrant
Purchase Agreement, dated as of November 4, 2016,
between the Company and T Squared Partners LP.
|
|
Incorporated
herein by reference to Exhibit 4.5 to the Company’s Current
Report on Form 8-K, filed on November 10, 2016.
|
|
|
|
|
|
|
|
Form of Common
Stock Purchase Warrant G.
|
|
Incorporated herein
by reference to Exhibit 4.5 to the Company’s Current Report
on Form 8-K, filed on November 10,
2016
|
|
|
|
|
|
|
|
Form of Common
Stock Purchase Warrant H.
|
|
Incorporated herein
by reference to Exhibit 4.5 to the Company’s Current Report
on Form 8-K, filed on November 10,
2016
|
|
|
|
|
|
|
|
Form of Common
Stock Purchase Warrant I
.
|
|
Incorporated herein
by reference to Exhibit 4.5 to the Company’s Current Report
on Form 8-K, filed on November 10,
2016
|
|
|
|
|
|
|
|
Form of Common
Stock Purchase Warrant
F
.
|
|
Filed
herewith.
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|
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Form of Common
Stock Purchase Warrant.
|
|
Filed herewith.
|
|
|
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|
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Form of
Common Stock Purchase Warrant.
|
|
Incorporated
herein by reference to Exhibit 4.6 to the Company’s Current
Report on Form 8-K, filed on January 5, 2017.
|
|
|
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4.4
|
|
Form of
Warrant.**
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4.5 |
|
Form of Warrant Agreement ** |
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4.6
|
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Form of
Underwriter's Warrants.**
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5.1
|
|
Opinion
of Greenberg Traurig, P.A.**
|
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|
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Amendment
to Preferred Stock Purchase Agreement, dated as of
December 30, 2010, between the Company and T Squared Investment
LLC.
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on January 5, 2011.
|
|
|
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|
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Preferred
Stock Exchange Agreement, dated as of October 16,
2015, between the Company and T Squared Partners LP.
|
|
Incorporated
herein by reference to Exhibit 10.7 to the Company’s Current
Report on Form 8-K, filed on October 19, 2015.
|
|
|
|
|
|
|
|
Executive
Employment Agreement, dated as of September 13, 2012,
between the Company and William O’Dowd.
†
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on November 19, 2012.
|
|
|
|
|
|
|
|
Executive
Employment Agreement Letter of Extension, dated as of
December 31, 2014.
†
|
|
Incorporated
herein by reference to Exhibit 10.4 in the Company’s Annual
Report on Form 10-K for the year ended December 31,
2014.
|
|
|
|
|
|
|
|
Revolving
Promissory Note, dated as of December 31, 2011, in
favor of William O’Dowd.
|
|
Incorporated
herein by reference to Exhibit 10.2 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2014.
|
|
|
|
|
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|
|
Form of
Loan and Security Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2014.
|
|
|
|
|
|
|
|
Form of
Equity Purchase Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.6 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2014.
|
|
|
|
|
|
|
|
Form of
Subscription Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.8 to the Company’s Current
Report on Form 8-K, filed on December 15, 2015.
|
|
|
|
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|
|
Form of
Convertible Note.
|
|
Incorporated
herein by reference to Exhibit 10.9 to the Company’s Current
Report on Form 8-K, filed on December 15, 2015.
|
|
|
|
|
|
|
|
Form of
Subscription Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.11 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2015.
|
|
|
|
|
|
|
|
Subscription
Agreement, dated a
s of
March 4, 2016, between
the Company and Dolphin Entertainment, Inc.
|
|
Incorporated
herein by reference to Exhibit 10.10 to the Company’s Current
Report on Form 8-K, filed on March 11, 2016.
|
|
|
|
|
|
|
|
Form of
Subscription Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on April 7, 2016.
|
|
|
|
|
|
|
|
Form of
Debt Exchange Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on June 3, 2016.
|
|
|
|
|
|
|
|
Form of
Subscription Agreement.
|
|
Incorporated
herein by reference to Exhibit 10.13 to the Company’s Current
Report on Form 8-K, filed on June 28, 2016.
|
|
|
|
|
|
|
|
Dolphin
Entertainment Inc., 2017 Equity Incentive Plan.
†
|
|
Incorporated
herein by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-8, filed on August 08,
2017.
|
|
|
|
|
|
|
|
Executive
Employment Agreement, dated as of March 30, 2017, by and between
the Company and Allan Mayer.†
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
List of
Subsidiaries of the Company.
|
|
Incorporated
herein by reference to Exhibit 21.1 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2016.
|
|
|
|
|
|
|
|
Consent
of BDO USA, LLP (Dolphin Digital Media, Inc. Consolidated Financial
Statements).
|
|
Filed
herewith.
|
|
|
|
|
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|
|
Consent
of BDO USA, LLP (42West, LLC Financial Statements).
|
|
Filed
herewith.
|
|
|
|
|
|
|
23.3
|
|
Consent
of Greenberg Traurig, P.A. (contained in Exhibit 5.1
hereto).**
|
|
|
|
|
|
|
|
24.1
|
|
Power
of Attorney.
|
|
Previously
filed.
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document.
|
|
Filed
herewith.
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document.
|
|
Filed herewith.
|
|
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document.
|
|
Filed
herewith.
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document.
|
|
Filed
herewith.
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document.
|
|
Filed
herewith.
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document.
|
|
Filed
herewith.
|
No. F
|
Issue Date:
[*]
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DOLPHIN DIGITAL MEDIA, INC.
By:
Name:
Title:
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Dated:
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______________________________________________________________________________
(Signature
must conform to name of holder as specified on the fact of the
Warrant.)
______________________________________________________________________________
_______________________________________________________________________________
(Address)
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No.
____
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Issue Date:
[*]
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Transferees
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Percentage
Transferred
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Number
Transferred
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DOLPHIN DIGITAL MEDIA, INC.
By:
/s/ William O’Dowd
IV
Name:
William O’Dowd IV
Title:
Chief Executive Officer
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EXECUTIVE
/s/ Allan
Mayer
ALLAN
MAYER
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EBITDA
Target
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$3,750,000
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