# EDGAR Filing Document

**Accession Number:** 0001282224
**File Stem:** 0001553350-23-000051
**Filing Date:** 2023-1
**Character Count:** 88939
**Document Hash:** 211d47f8d13ac9e11b55be7344e2b192
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001553350-23-000051.hdr.sgml**: 20230130

**ACCESSION NUMBER**: 0001553350-23-000051

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 22

**CONFORMED PERIOD OF REPORT**: 20221114

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230130

**DATE AS OF CHANGE**: 20230130

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Dolphin Entertainment, Inc.
- **CENTRAL INDEX KEY:** 0001282224
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PERSONAL SERVICES [7200]
- **IRS NUMBER:** 860787790
- **STATE OF INCORPORATION:** FL
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38331
- **FILM NUMBER:** 23568683

**BUSINESS ADDRESS:**
- **STREET 1:** 150 ALHAMBRA CIRCLE
- **STREET 2:** SUITE 1200
- **CITY:** CORAL GABLES
- **STATE:** FL
- **ZIP:** 33134
- **BUSINESS PHONE:** 305-774-0407

**MAIL ADDRESS:**
- **STREET 1:** 150 ALHAMBRA CIRCLE
- **STREET 2:** SUITE 1200
- **CITY:** CORAL GABLES
- **STATE:** FL
- **ZIP:** 33134

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** DOLPHIN DIGITAL MEDIA INC
- **DATE OF NAME CHANGE:** 20080818

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** LOGICA HOLDINGS INC
- **DATE OF NAME CHANGE:** 20070716

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MAXIMUM AWARDS INC
- **DATE OF NAME CHANGE:** 20040301

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

 **SECURITIES AND EXCHANGE COMMISSION** 

Washington, D.C. 20549

**FORM 8-K** 

**Current Report**

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

Date of Report (Date of earliest event reported): **November 14, 2022**

**DOLPHIN ENTERTAINMENT, INC.**

*(Exact name of registrant as specified in its charter)*

---

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

---

**150 Alhambra Circle** **, Suite 1200, Coral Gables, Florida 33134**

*(Address of principal executive offices) (Zip Code)*

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

**Not Applicable**

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

 

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

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

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

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

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

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

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, $0.015 par value per share | DLPN | The Nasdaq Capital Market |

---

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

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

**INTRODUCTORY NOTE**

On November 14, 2022 (the "<u>Closing Date</u>"), Dolphin Entertainment, Inc., a Florida corporation (the "<u>Company</u>"), through its wholly-owned subsidiary Social MidCo, LLC ("<u>MidCo</u>"), acquired all of the issued and outstanding membership interests of Socialyte, LLC, a Delaware limited liability company ("<u>Socialyte</u>"), pursuant to a membership interest purchase agreement dated the Closing Date, between the Company and NSL Ventures, LLC (the "<u>Acquisition</u>"). Socialyte is a NY and Los Angeles-based creative agency specializing in social media influencer marketing campaigns for brands.

On November 14, 2022, the Company filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the "<u>Original Report</u>"), in which the Company reported in Item 5 the consummation of the Acquisition and related matters. This Current Report on Form 8-K is being filed to further amend the Original Report to provide (i) the audited consolidated balance sheets of Socialyte as of December 31, 2021 and 2022 and the related consolidated statements of operations, consolidated statements of member's equity (deficit) and consolidated statements of cash flows for the years ended December 31, 2021 and 2020, together with the accompanying notes thereto, (ii) the unaudited consolidated financial statements of Socialyte as of and for the nine month period ended September 30, 2022, and (iii) the unaudited pro forma condensed combined financial information of the Company. giving effect to the Acquisition, as of September 30, 2022 and for the year ended December 31, 2021 and the nine months ended September 30, 2022.

**Item 9.01 Financial Statements and Exhibits.**

**(a) Financial statements of businesses acquired**.

The audited consolidated balance sheets of Socialyte as of December 31, 2021 and 2022 and the related consolidated statements of operations, consolidated statements of member's equity (deficit) and consolidated statements of cash flows for the years ended December 31, 2021 and 2020, together with the accompanying notes thereto and the unaudited consolidated financial statements of Socialyte as of and for the nine month period ended September 30, 2022 are filed as Exhibit 99.1 hereto and are incorporated herein by reference.

**(b) Pro forma financial information.**

The unaudited pro forma condensed combined financial information, including the condensed combined balance sheet as of September 30, 2022, statement of operations for the nine months ended September 30, 2022 and statement of operations for the period ending December 31, 2021 are filed as Exhibit 99.2 and are incorporated herein by reference. The unaudited pro forma condensed combined financial information was prepared giving effect to the Acquisition as if it had occurred on January 1, 2021. This unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the Company's actual results of operations or financial position would have been if the Acquisition had occurred on the dates indicated, nor are they necessarily indicative of the Company's future operating results or financial position.

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

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 23.1 | [Consent of Aprio, LLP](dlpn_ex23z1.htm) |
| 99.1 | [Historical Consolidated Financial Information of Socialyte, LLC](dlpn_ex99z1.htm) |
| 99.2 | [Unaudited Pro Forma Condensed Combined Financial Information of Dolphin Entertainment, Inc.](dlpn_ex99z2.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

 

**SIGNATURES**

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

---

| | | |
|:---|:---|:---|
|  | **DOLPHIN ENTERTAINMENT, INC.** | **DOLPHIN ENTERTAINMENT, INC.** |
| Date: January 30, 2023 | By: | /s/ Mirta A. Negrini |
|  |  | Mirta A. Negrini |
|  |  | Chief Financial and Operating Officer |

---

## Exhibit 23.1

**EXHIBIT 23.1**

---

| | |
|:---|:---|
| ![](image_002.gif) | ![](image_003.gif) |

---

Consent of Independent Auditors

Socialyte, LLC

New York, New York

We consent to the incorporation by reference in the Registration Statement on Form S-1 (No. 333- 267336) of Dolphin Entertainment, Inc. of our report dated January 27, 2022, relating to the consolidated financial statements of Socialyte, LLC, appearing in this Form 8-K of Dolphin Entertainment, Inc. for the year ended December 31, 2021 and 2020.

![Text, letter Description automatically generated](image_002.jpg)

Walnut Creek, California January 28, 2023

Aprio, LLP 150 Post Street Suite 200 San Francisco, CA 94108 415.777.4488 Aprio.com <br>Independently Owned and Operated Member of Morison Global

## Exhibit 99.1

**EXHIBIT 99.1**

**SOCIALYTE, LLC**

**<u>AND ITS SUBSIDIARY</u>**

**<u>(Delaware Limited Liability Companies)</u>**

**<u>CONSOLIDATED FINANCIAL STATEMENTS</u>**

**<u>SEPTEMBER 30, 2022</u>**

![](image_003.jpg)

**SOCIALYTE LLC, AND ITS SUBSIDIARY**

**TABLE OF CONTENTS**

**<u>SEPTEMBER 30, 2022</u>**

---

| | |
|:---|:---|
|  | **Page(s)** |
| Independent accountants' review report | 2 |
| Consolidated balance sheet | 3 |
| Consolidated statement of income | 4 |
| Consolidated statement of members ' equity | 5 |
| Consolidated statement of cash flows | 6 |
| Notes to consolidated financial statements | 7 |

---

![](image_004.jpg)

**Independent Auditors' Review Report**

**The Members of** 

**Socialyte** **, LLC**

**Results of Review of Interim Financial Information**

We have reviewed the accompanying consolidated financial statements of Socialyte, LLC (a Delaware Limited Liability Company) and its subsidiaries, which comprise the consolidated balance sheet for the nine months ended September 30, 2022 and the related consolidated statements of income, members' equity, and cash flows for the nine months then ended, and the related notes to the consolidated financial statements (collectively referred to as the interim financial information).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information in order for them to be in accordance with accounting principles generally accepted in the United States of America.

**Basis** **of Review Results**

We conducted our review in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to review of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Socialyte, LLC and its subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our review. We believe that the results of the review procedures provide a reasonable basis or our conclusion.

**Responsibilities** **of Management for the Interim Financial Information**

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

![](image_001.jpg)

Walnut Creek, California

January 27, 2023

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 2022</u>**

---

| | |
|:---|:---|
| <u>ASSETS</u> |  |
| CURRENT: |  |
| Cash | $205822 |
| Accounts receivable, net (pledged) | 3919324 |
| Prepaid expenses | 216005 |
| TOTAL CURRENT ASSETS | 4341151 |
| PROPERTY AND EQUIPMENT, net (encumbered) | 30827 |
| OTHER ASSETS: |  |
| Receivable from related parties | 2800704 |
| Intangible assets, net | 321 ,490 |
|  | $7494, 172 |
| <u>LIABILITIES</u> |  |
| CURRENT: |  |
| Line of credit | $1500000 |
| Accounts payable | 2628590 |
| Accrued liabilities | 1494069 |
| Payable to related parties | 212577 |
| Deferred revenue | 1475742 |
| TOTAL LIABILITIES (All Current) | 7310978 |
| <u>MEMBERS' EQUITY</u> |  |
| <u>MEMBERS' EQUITY</u> | 183194 |
|  | $7494172 |

---

See accompanying independent accountants' review report and notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**CONSOLIDATED STATEMENT OF INCOME**

**<u>NINE MONTHS ENDED SEPTEMBER 30, 2022</u>**

---

| | |
|:---|:---|
| NET REVENUE | $4625908 |
| OPERATING EXPENSES: |  |
| General and administrative expenses | 4835576 |
| LOSS FROM OPERATIONS | (209668) |
| OTHER INCOME (EXPENSES): |  |
| Paycheck Protection Program loan forgiveness | 716343 |
| Interest expense | (31365) |
| NET INCOME | $475310 |

---

See accompanying independent accountants ' review report and notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>CONSOLIDATED STATEMENT OF MEMBERS' EQUITY</u>**

---

| | |
|:---|:---|
| Balance, January 1, 2022 | $(292116) |
| Net income | 475310 |
| Balance, September 30, 2022 | $183194 |

---

See accompanying independent accountants' review report and notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**CONSOLIDATED** **STATEMENT OF CASH FLOWS**

**<u>NINE</u>**  **<u>MONTHS ENDED SEPTEMBER 30, 2022</u>**

---

| | | |
|:---|:---|:---|
| CASH FLOW FROM OPERATING ACTIVITIES: |  |  |
| Net income |  | $475310 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| Depreciation and amortization | $85134 |  |
| Provision for bad debts | 410710 |  |
| Paycheck Protection Program loan forgiveness | (716343) |  |
| Decrease (increase) in: |  |  |
| Accounts receivable | 5789741 |  |
| Prepaid expenses | (9323) |  |
| Increase (decrease) in: |  |  |
| Accounts payable | (3812148) |  |
| Accrued expenses | (1926881) |  |
| Deferred revenue | (118142) | 297252) |
| NET CASH PROVIDED BY OPERATING ACTIVITIES |  | 178058 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
| Net receivable from related parties | (259559) |  |
| Purchases of property and equipment | (8915) |  |
| Purchases of intangible assets | (113501) |  |
| NET CASH USED BY INVESTING ACTIVITIES |  | (381975) |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
| Net decrease in line of credit | (665000) |  |
| NET CASH USED BY FINANCING ACTIVITIES |  | (665000) |
| NET DECREASE IN CASH |  | (868917) |
| CASH, beginning of year |  | 1074739 |
| CASH, end of period |  | $205822 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |
| Cash paid during the period for: |  |  |
| Interest |  | $31365 |

---

See accompanying independent accountants' review report and notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SEPTEMBER 30, 2022</u>**

**Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:**

Nature of business:

Socialyte, LLC and its subsidiary (the "Company ") are American multi-platform media companies that focuses on fashion, beauty, music and lifestyle reaching its audience through their influencers and digital properties. Revenue for the Company is generated from influencer content and marketing services.

Principles of consolidation:

The accompanying consolidated financial statements include the accounts of Socialyte, LLC and Simply Stylist, LLC, a single member LLC, after the elimination of intercompany accounts and transactions.

Basis of accounting:

The accompanying financial statements are prepared on the accrual basis of accounting.

Accounts receivable:

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company uses the allowance method to account for uncollectible accounts. Accounts receivable are reviewed monthly and an allowance is provided, if necessary, for the estimated amount of uncollectible accounts. It is the Company's policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. Allowance for doubtful accounts was approximately $749,234 as of September 30, 2022.

Property and equipment:

Property and equipment is stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operation s as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

Equipment 3 years <br> Computer software 3 years

Goodwill:

The Company adopted the accounting alternative offered to nonpublic entities for the subsequent measurement of goodwill. In accordance with this alternative, the Company amortizes goodwill over ten years on the straight-line basis and only evaluates goodwill for impairment at the entity level when a triggering event occurs.

Intangible assets:

Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flow.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SEPTEMBER 30, 2022</u>**

**Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(Continued):**

Impairment of long-lived assets:

Long-lived assets are reviewed for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable. The Company believes that no impairment exists of its long-lived assets at September 30, 2022.

Revenue recognition:

The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers using the modified retrospective method. The Company generates revenue from its managed services when a marketer (typically a brand, agency or partner) pays the Company to provide custom content, influencer marketing, amplification or other consulting services ("Managed Services").

The Company enters into management agreements with a roster of social media influencers and are paid a percentage of the revenue earned by the social media influencer. Due to the short- term nature of these contracts, the performance obligation is typically completed and revenue is recognized at a point in time, typically the date of publication. The Company also recognizes certain fees over time as the services are consumed by its clients.

For Managed Services Revenue, the Company enters into an agreement to provide services that may include multiple distinct performance obligations in the form of: (i) an integrated marketing campaign to provide influencer marketing services, which may include facilitating influencer blogs, tweets, photos or videos shared through social network offerings and content promotion in accordance with the brands guidelines and (ii) custom content items, such as a research or news article, informational material or videos.

The Company may provide one type or a combination of all types of these performance obligations on a statement of work for a negotiated fee. The Company allocates revenue to each performance obligation in the contract at inception based on its relative standalone selling price. These performance obligations are to be provided over a stated period that may range from one day to one year. Revenue is accounted for when the performance obligation has been satisfied depending on the type of service provided.

*Prin cipal vs. Agent:*

When a third-party is involved in the delivery of the Company's services to their client, the Company assesses whether or not they act as a principal or an agent in the arrangement. The assessment is based on whether the Company controls the specified services at any time before they are transferred to the customer.

If the Company determines they do not control the specified services before transferring those services to the customer, and they are not primarily responsible for the performance of the third-party services, nor can they redirect those services to fulfill any other contracts, the Company acts as an agent on the performance obligations and records revenue as the net amount of the gross billings less amounts remitted to third parties. In these types of arrangements, the gross billings are recorded as other receivables in the consolidated balance sheets and the amounts to be remitted to third parties are recorded as "influencer accruals" within accrued liabilities in the consolidated balance sheets.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SEPTEMBER 30, 2022**

**Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(Continued):**

Income taxes:

Socialyte, LLC and Simply Stylist, LLC elected to be treated as limited liability companies for federal and state income tax purposes. As a result, the net income of Socialyte, LLC and Simply Stylist, LLC are taxable to the members. Accordingly, the accompanying consolidated financial statements do not include a provision for federal and state income taxes.

**Note 2. NATURE OF ESTIMATES:**

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

**Note 3. CONCENTRATIONS OF CREDIT RISK:**

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions. At times, the account balances may exceed the institution's federally insured limits. The Company has not experienced any losses in such accounts. Trade accounts receivable are due from a large number of customers in North America.

**Note 4. PROPERTY AND EQUIPMENT:**

The balance of property and equipment by category at September 30, 2022 is as follows:

---

| | |
|:---|:---|
| Computer software | $367127 |
| Equipment | 124676 |
|  | 491803 |
| Less accumulated depreciation | 460976 |
| Total | $30827 |

---

Depreciation expense for the nine months ended September 30, 2022 was $51,360.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SEPTEMBER 30, 2022</u>**

**Note 5. INTANG IBLE ASSETS:**

The carrying amount of intangible assets at September 30, 2022 is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Estimated**<br>**<u>Useful</u>**  **<u>Life</u>** | **Gross Carrying**<br>**Amount** | **Accumulated**<br>**Amortization** | **Net** **Carrying**<br>**Amount** |
| Goodwill | 10 years | $308631 | $163746 | $144885 |
| Goodwill - Boldstreak | 3 years | 263501 | 86896 | 176605 |
|  |  | $572132 | $250642 | $321490 |

---

Amortization expense for the nine months ended September 30, 2022 was $33,774.

Based upon intangible assets recorded as of September 30, 2022, future amortization of intangible assets is expected to be as follows:

---

| | |
|:---|:---|
| Year Ending<br> <u>December 31.</u> |  |
| 2022 Q4 | $23053 |
| 2023 | 65944 |
| 2024 | 42213 |
| 2025 | 42213 |
| 2026 | 42213 |
| Thereafter | 105854 |
| Total | <u>$321 490</u> |

---

**Note 6. LINE OF CREDIT:**

The Company has a revolving line of credit with a bank, secured by the personal guarantee of the majority member. Under this line of credit, advances will be made to the Company from time to time up to and including June 22, 2022, not to exceed $3,500,000. This line shall bear interest at the U.S. prime rate less 0.50% with a minimum rate of 2.75%, currently at 4.25%. The balance outstanding as of September 30, 2022 was $1,500,000. The line was renewed on June 22, 2022 for the amount of $1,500,000, due June 22, 2023, with interest rate Prime less 0.50%.

**Note 7. ACCRUED LIABILITIES:**

Accrued liabilities at September 30, 2022 consist of the following:

---

| | |
|:---|:---|
| Influencer accruals | $1259913 |
| Payroll and bon uses | 167078 |
| Other | 67078 |
| Total | $1494069 |

---

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</u>**  **<u>- SEPTEMBER 30, 2022</u>**

**Note 8. PAYCHECK PROTECTION PROGRAM LOAN:**

In response to the coronavirus (COVID-19) outbreak in 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief, and Economic Security Act that, among other economic stimulus measures, established the Paycheck Protection Program (PPP) to provide small business loans.

In March 2021, the Company obtained a second PPP loan for $716,343. The Company used the proceeds from the note for qualifying expenses and applied for forgiveness on July 15, 2022. Management received approval of its application for the loan to be forgiven in August 2022, and recognized a gain on forgiveness of the loan during the quarter ended September 30, 2022.

**Note 9. RELATED PARTY TRANSACTIONS AND BALANCES:**

The Company has receivable from affiliates of $2,800,704 as of September 30, 2022. The Company has payable to affiliates of $212,577 as of September 30, 2022. Balances due from and due to related parties relate to working capital advances. The Company had an operating lease with an affiliate company through June 30, 2022. The amount paid to related party is $85,495 during the nine month ended September 30, 2022.

**Note 10. MEMBERS' EQUITY:**

On August 20, 2015, Nylon Media, Inc. contributed substantially all of the assets and liabilities relating to the "Socialyte" business to a newly formed subsidiary, Socialyte, LLC, a Delaware limited liability company ("Socialyte, LLC") formed July 2015, in exchange for 6,500,000 Class A Units of Socialyte, LLC. At September 30, 2022, 6,500,000 Class A units are outstanding.

Pursuant to the Amended and Restated Limited Liability Company Agreement of Socialyte, LLC (the "Socialyte Operating Agreement"), Socialyte, LLC may issue Profits Interest Units of Socialyte, LLC to its existing or new employees, officers, consultants, managers, investors or other providers of services to Socialyte, LLC or any of its subsidiaries pursuant to, and subject to the terms of, written agreements approved by Socialyte, LLC's board of managers (each, a "Socialyte <u>Unit Issuance Agreement</u>"). The Profits Interest Units of Socialyte, LLC are intended to constitute "profits interest," as such term is used by IRS Revenue Procedure 93-27, 1993-2 C.B. 343 and IRS Revenue Procedure 2001-43, 2001 -2 C.B. 191 for federal income tax purposes. Vesting terms of the Profits Interest Units of Socialyte, LLC are set forth in the applicable Socialyte Unit Issuance Agreement. Immediately prior to the issuance of each Profits Interest Unit of Socialyte, LLC, the Gross Asset Values (as defined in the Socialyte Operating Agreement) of all assets of Socialyte, LLC shall be adjusted to equal their respective fair market values in accordance with the terms set forth in the Socialyte Operating Agreement. Each Profits Interest Unit of Socialyte, LLC (a) shall entitle its record owner to share in the appreciation in the fair market value of Socialyte, LLC from the date of issuance of such Profits Interest Unit and not in any fair market value of Socialyte, LLC accrued prior to the issuance of such Profits Interest Unit, and (b) shall not be entitled to any retroactive allocation of the profits, losses, income, gains, deductions, credits or other items of Socialyte, LLC.

During the nine months ended September 30, 2022, no Profits Interest Units were issued. On September 30, 2022, 7,010,089 Profit Interest Units are outstanding.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</u>**  **<u>- SEPTEMBER 30, 2022</u>**

**Note 11. RETIREMENT PLAN:**

Effective September 1, 2019, the Company adopted a 401(k)-retirement savings plan which includes a discretionary employer-provided match covering substantially all full-time employees. The employees must attend age of 21 and complete three months of service to be eligible for employee deferrals. Eligible employees are automatically enrolled in the plan after satisfying the plan entry requirements, with 3% contribution, if not chosen otherwise. Employer contribution equals 50% on the first 4% of pay that employee elects to contribute, and subject to vesting schedule, with interest fully vested after completion of three years of service. For the nine months ended September 30, 2022, the discretionary contribution was $53,152.

**Note** **13. SUBSEQUENT EVENTS:**

Management has evaluated subsequent events through January 27, 2023, the date which the financial statements were available to be issued.

On November 14, 2022, (the "Closing Date"), pursuant to a membership purchase agreement, NSL Ventures, LLC ("NSL "), the single member of Socialyte LLC ("Socialyte") sold I00% its membership interest in Socialyte to Dolphin Entertainment, Inc. ("Dolphin"), a Florida corporation. As consideration for the sale, NSL received $13 million and up to $5 million of additional consideration if certain financial targets are met in 2022. On the Closing Date, Dolphin paid NSL $5 million cash and issued 1,346,257 shares of its common stock, par value $0.015 trading on Nasdaq Capital Markets under the symbol DLPN (the "Common Stock"). Dolphin issued to NSL a $3 million unsecured promissory note to be repaid in two equal installments during the year ended December 31, 2023. In addition, NSL was issued 685,234 shares of Common Stock in satisfaction of the Closing Date working capital adjustment.

The sale of Socialyte was partially financed through a $3 million, five-year secured loan from BankProv in which Socialyte is a co-borrower ("Term Note "). The Term Note bears interest at a rate of 7.37% per annum and provides for monthly payments of principal plus interest commencing on December 14, 2022 for a period of five years. The Term Note contains clauses for prepayment penalties if the loan is prepaid during the first three years as well as other customary clauses. Prior to the Closing Date, NSL paid off the line of credit with First Republic Bank.

**<u>SOCIALYTE,</u>**  **<u>LLC</u>**

**<u>AND ITS SUBSIDIARY</u>**

**<u>(Delaware Limited Liability Companies)</u>**

**<u>CONSOLIDATED FINANCIAL STATEMENTS</u>**

**<u>DECEMBER 31, 2021</u>**  **<u>AND DECEMBER 31, 2020</u>**

![Graphical user interface, application Description automatically generated with medium confidence](image_003.jpg)

**SOCIALYTE LLC, AND ITS SUBSIDIARY**

**TABLE OF CONTENTS**

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

---

| | |
|:---|:---|
|  | **Page(s)** |
| Independent Auditors' report | 15 |
| Consolidated balance sheets | 17 |
| Consolidated statements of operations | 18 |
| Consolidated statements of members ' equity (deficit) | 19 |
| Consolidated statements of cash flows | 20 |
| Notes to consolidated financial statements | 21 |

---

![](image_004.jpg)

**Independent Auditors' Report**

The Members of

Socialyte, LLC

**Opinion**

We have audited the accompanying financial statements of Socialyte, LLC and its subsidiary (Delaware limited liability companies), which comprise the consolidated balance sheets as of December 31, 2021 and Decem ber 31, 2020, and the related consolidated statements of operations, member's equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Socialyte, LLC and its subsidiary as of December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor 's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Socialyte, LLC and its subsidiary and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

**Correction of Error**

As discussed in Notes 1 and 12 to the financial statements, management has determined that revenue should be reported net of amounts due to third parties when it acts as the agent for certain contracts. In addition, certain errors resulting in understatement of amounts previously reported as accounts receivable, accounts payable and accrued expenses, and net sales for the years ended December 31, 2021 and 2020 were discovered by management of the Company during the current year. Accordingly, amounts reported for these accounts have been restated in the 2021 and 2020 financial statements now presented, to correct the error. Our opinion is not modified with respect to the matter.

**Prior Period Financial Statements**

The consolidated financial statements as of December 31, 2020, were audited by RINA Accountancy LLP, who merged with Aprio LLP as of August 1, 2022, and whose report dated November 10, 2021, expressed an unmodified opinion on those consolidated statements.

**Responsibilities of Management for the Financial Statements**

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

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

**Auditor's Responsibilities for the Audit of the Financial Statements**

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

ln performing an audit in accordance with generally accepted auditing standards, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exercise professional judgment and maintain professional skepticism throughout the audit.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances , but not for the purpose of expressing an opinion on the effectiveness of Socialyte , LLC and its subsidiary ' s
internal control. Accordingly , no
such opinion is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate the appropriateness of accounting
policies used and the reasonablenes s of
significant accounting estimates made by management , as
well as evaluate the overall presentation of the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conclude whether , in our judgment , there
are conditions or events , considered
in the aggregate, that raise substantial doubt about Socialyte , LLC
and its subsidiary ' s ability
to continue a s a going concern
for a reasonable period of time.

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

![](image_005.jpg)

Walnut Creek, California

January 27, 2023

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>CONSOLIDATED BALANCE SHEETS</u>**

---

| | | |
|:---|:---|:---|
|  | December 31, 2021<br>(Restated) | December 31, 2020<br>(Restated) |
| ASSETS |  |  |
| CURRENT : |  |  |
| Cash | $1074739 | $629303 |
| Accounts receivable, net (pledged) | 10119775 | 7195506 |
| Prepaid expenses | 206682 | 125061 |
| TOTAL CURRENT ASSETS | 11401196 | 7949870 |
| PROPERTY AND EQUIPMENT, net (encumbered) | 73272 | 82115 |
| OTHER ASSETS: |  |  |
| Receivable from related parties | 2559149 | 2116642 |
| Intangible assets, net | 241763 | 322626 |
|  | $14275380 | $10471 ,253 |
| LIABILITIES |  |  |
| CURRENT: |  |  |
| Line of credit | $2165000 | $150000 |
| Accounts payable | 6440738 | 5113811 |
| Accrued liabilities | 3420950 | 2794238 |
| Note payable - related party |  | 2400000 |
| Payable to related parties | 230581 | 167497 |
| Deferred revenue | 1593884 | 1592559 |
| TOTAL CURRENT LIABILITIES | 13851153 | 12218105 |
| LONG-TERM: |  |  |
| Paycheck Protection Program loan | 716343 | 629377 |
| TOTAL LIABILITIES | 14567496 | 12847482 |
| MEMBERS' EQUITY (DEFICIT) |  |  |
| MEMBERS' EQUITY (DEFICIT) | (292116) | (2376229) |
|  | $14275380 | $10471253 |

---

See notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>CONSOLIDATED STATEMENTS OF OPERATIONS</u>**

---

| | | |
|:---|:---|:---|
|  | Year Ended<br>December 31, 2021<br>(Restated) | Year Ended<br>December 31, 2020<br>(Restated) |
| NET REVENUE | $8210737 | $5053683 |
| OPERATING EXPENSES: |  |  |
| General and administrative expenses | 6454156 | 5064034 |
| INCOME (LOSS) FROM OPERATIONS | 1756581 | (10351) |
| OTHER INCOME (EXPENSES) : |  |  |
| Paycheck Protection Program loan forgiveness | 629377 |  |
| Interest expense | (95945) | (79796) |
| Loss on disposal of fixed assets |  | (48107) |
| Other expense | (205900) | (317739) |
| NET INCOME (LOSS) | $2084113 | $(455993) |

---

See notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)**

---

| | |
|:---|:---|
|  | Restated |
| Balance at January 1, 2020 | $(1920236) |
| Net loss | (455993) |
| Balance at December 31, 2020 | (2376229) |
| Net income | 2084113 |
| Balance at December 31, 2021 | $(292116) |

---

See notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**<u>CONSOLIDATED STATEMENTS OF CASH FLOWS</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Year Ended<br> December 31, 2021 | Year Ended<br> December 31, 2021 | Year Ended<br> December 31, 2020 | Year Ended<br> December 31, 2020 |
|  | (Restated) | (Restated) | (Restated) | (Restated) |
| CASH FLOW FROM OPERATING ACTIVITIES: |  |  |  |  |
| Net income (loss) |  | $2084113 |  | $(455993) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |
| Depreciation and amortization | $141981 |  | $176358 |  |
| Loss from disposal of fixed assets |  |  | 48107 |  |
| Provision for bad debts | 176254 |  | 41932 |  |
| Paycheck Protection Program loan forgiveness | (629377) |  |  |  |
| Decrease (increase) in: |  |  |  |  |
| Accounts receivable | (3100523) |  | (1799972) |  |
| Prepaid expenses | (81621) |  | (72292) |  |
| Increase (decrease) in: |  |  |  |  |
| Accounts payable | 1326927 |  | 1985908 |  |
| Accrued expenses | 626712 |  | 53783 |  |
| Deferred revenue | 1325 | 15383222 | 66347 | 500171 |
| NET CASH PROVIDED BY OPERATING ACTIVITIES |  | 545791 |  | 44178 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |
| Net receivable from related parties | (379423) |  | (893272) |  |
| Purchases of property and equipment | (52275) |  | (37778) |  |
| Purchases of intangible assets |  |  | (150000) |  |
| NET CASH USED BY INVESTING ACTIVITIES |  | (431698) |  | (1081050) |
| CASH FLOWS FROM FINANCTNG ACTIVITIES: |  |  |  |  |
| Net increase (decrease) in line of credit | 2015000 |  | (1700000) |  |
| Proceeds (repayment) from related party note payable | (2400000) |  | 2400000 |  |
| Proceeds from Paycheck Protection Program | 716343 |  | 629377 |  |
| NET CASH PROVIDED BY FINANCING ACTIVITIES |  | 331343 |  | 1329377 |
| NET INCREASE TN CASH |  | 445436 |  | 292505 |
| CASH, beginning of year |  | 629303 |  | 336798 |
| CASH, end of year |  | $1074739 |  | $629303 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |  |  |
| Cash paid during the year for: |  |  |  |  |
| Interest |  | $95945 |  | $79796 |
| Noncash investing and financing transactions: |  |  |  |  |
| Sale of software technology to related party |  | $— |  | $84530 |

---

See notes to consolidated financial statements.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

**Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING** **POLICIES:**

Nature of business:

Socialyte, LLC and its subsidiary (the "Company") are American multi-platform media companies that focuses on fashion, beauty, music and lifestyle reaching its audience through their influencers and digital properties. Revenue for the Company is generated from influencer content and marketing services.

Principles of consolidation:

The accompanying consolidated financial statements include the accounts of Socialyte, LLC and Simply Stylist, LLC, a single member LLC, after the elimination of intercompany accounts and transactions.

Basis of accounting:

The accompanying financial statements are prepared on the accrual basis of accounting.

Accounts receivable:

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company uses the allowance method to account for uncollectible accounts. Accounts receivable are reviewed monthly and an allowance is provided, if necessary, for the estimated amount of uncollectible accounts. It is the Company's policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. Allowance for doubtful accounts was approximately $268,000 and $92,000 as of December 31, 2021 and December 31, 2020, respectively.

Property and equipment:

Property and equipment is stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

Equipment 3 years <br> Computer software 3 years

Goodwill:

The Company adopted the accounting alternative offered to non public entities for the subsequent measurement of goodwill. In accordance with this alternative, the Company amortizes goodwill over ten years on the straight-line basis and only evaluates goodwill for impairment at the entity level when a triggering event occurs.

Intangible assets:

Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flow.

Impairment of long-lived assets:

Long-lived assets are reviewed for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable. The Company believes that no impairment exists of its long-lived assets at December 31, 2021 and December 31, 2020.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

**Note 1. NATURE** **OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(Continued):**

Revenue recognition:

The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers using the modified retrospective method. The Company generates revenue from its managed services when a marketer (typically a brand, agency or partner) pays the Company to provide custom content, influencer marketing, amplification or other consulting services ("Managed Services").

The Company enters into management agreements with a roster of social media influencers and are paid a percentage of the revenue earned by the social media influencer. Due to the short- term nature of these contracts, the performance obligation is typically completed and revenue is recognized at a point in time, typically the date of publication. The Company also recognizes certain fees over time as the services are consumed by its clients.

For Managed Services Revenue, the Company enters into an agreement to provide services that may include multiple distinct performance obligations in the form of: (i) an integrated marketing campaign to provide influencer marketing services, which may include facilitating influencer blogs, tweets, photos or videos shared through social network offerings and content promotion in accordance with the brands guidelines and (ii) custom content items, such as a research or news article, informational material or videos.

The Company may provide one type or a combination of all types of these performance obligations on a statement of work for a negotiated fee. The Company allocates revenue to each performance obligation in the contract at inception based on its relative standalone selling price. These performance obligations are to be provided over a stated period that may range from one day to one year. Revenue is accounted for when the performance obligation has been satisfied depending on the type of service provided.

*Principal vs . Agent*

When a third-party is involved in the delivery of the Company's services to their client, the Company assesses whether or not they act as a principal or an agent in the arrangement. The assessment is based on whether the Company controls the specified services at any time before they are transferred to the customer.

If the Company determines they do not control the specified services before transferring those services to the customer, and they are not primarily responsible for the performance of the third-party services, nor can they redirect those services to fulfill any other contracts, the Company acts as an agent on the performance obligations and records revenue as the net amount of the gross billings less amounts remitted to third parties. In these types of arrangements, the gross billings are recorded as other receivables in the consolidated balance sheets and the amounts to be remitted to third parties are recorded as "influencer accruals" within accrued liabilities in the consolidated balance sheets.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

**Note 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(Continued):**

Revenue recognition (continued):

*Fa ctoring Agreement*

On May 6, 2022, the Company entered into a Partnership Factoring Agreement ("Factoring Agreement") with CLO Advances LLC ("CLO"), in which the Company agreed to sell to CLO client receivables for a purchase price of 1% of the receivable purchases. The Factoring Agreement was effective June 1, 2022, for a period of 24 months and will continue for successive terms of one year unless either party notifies the other of its intention to terminate the Factoring Agreement with at least 30-day notice. The purchase of the client receivables is at the sole discretion of CLO. CLO will pay the Company within 48 hours of the Company completing the service to the client for the receivables that CLO opts to purchase.

Income taxes:

Socialyte, LLC and Simply Stylist, LLC elected to be treated as limited liability companies for federal and state income tax purposes. As a result, the net income of Socialyte, LLC and Simply Stylist, LLC are taxable to the members. Accordingly, the accompanying consolidated financial statements do not include a provision for federal and state income taxes.

**Note 2. NATURE OF ESTIMATES:**

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

**Note 3. CONCENTRATIONS OF CREDIT RISK:**

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions. At times, the account balances may exceed the institution's federally insured limits. The Company has not experienced any losses in such accounts. Trade accounts receivable are due from a large number of customers in North America.

**Note 4. PROPERTY AND EQUIPMENT:**

The balance of property and equipment by category at December 31 is as follows:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2021 | 2020 |
| Computer software | $367127 | $367127 |
| Equipment | 115762 | 63487 |
|  | 482889 | 430614 |
| Less accumulated depreciation | 409617 | 348499 |
| Totals | $73272 | $82115 |

---

Depreciation expense for the years ended December 31, 2021 and December 31, 2020 was $61,118 and $119,226, respectively.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -** 

**<u>DECEMBER 31, 2021</u> <u>AND DECEMBER 31, 2020</u>**

**Note 5. INTANG IBLE ASSETS:**

The carrying amount of intangible assets is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Estimated | Gross Carrying | Accumulated | Net Carrying |
|  | Useful Life | Amount | Amortization | Amount |
| Goodwill | 10 years | $308631 | $140599 | $168032 |
| Goodwill - Boldstreak | 3 years | 150000 | 76269 | 73731 |
|  |  | $458631 | $216868 | $241763 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 |
|  | Estimated | Gross Carrying | Accumulated | Net Carrying |
|  | Useful Life | Amount | Amortization | Amount |
| Goodwill | 10 years | $308631 | $109736 | $198895 |
| Goodwill - Boldstreak | 3 years | 150000 | 26267 | 123731 |
|  |  | $458631 | $136005 | $322626 |

---

Amortization expense for the years ended December 31, 2021 and December 31, 2020 was $80,863 and $57,132, respectively.

Based upon intangible assets recorded as of December 31, 2021, future amortization of intangible assets is expected to be as follows:

---

| | |
|:---|:---|
| Year Ending<br> December 31, |  |
| 2022 | $80863 |
| 2023 | 54594 |
| 2024 | 30863 |
| 2025 | 30863 |
| Thereafter | 44580 |
| Total | $241763 |

---

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -** 

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

**Note 6. ACCRUED LIABILITIES:**

Accrued expenses consist of the following at December 31:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2021 | 2020 |
| Influencer accruals | $2725714 | $2674430 |
| Payroll and bonuses | 624306 | 87151 |
| Professional fees | 48930 | 20657 |
| Taxes | 12000 | 12000 |
| Other | 10000 |  |
| Totals | $3420950 | $2794238 |

---

**Note 7. LINE OF CREDIT:**

The Company has a revolving line of credit with a bank, secured by the personal guarantee of the majority member. Under this line of credit, advances will be made to the Company from time to time up to and including June 22, 2022, not to exceed $3,500,000. This line shall bear interest at the U.S. prime rate less 0.50% with a minimum rate of 2.75%, currently at 2.75%. The balance outstanding as of December 31, 2021 and December 31, 2020 was $2,165,000 and $150,000, respectively. The line was renewed on June 22, 2022 for the amount of $1,500,000, due June 22, 2023, with interest rate Prime less 0.50%.

**Note** **8. PAYCHECK PROTECTION PROGRAM LOAN:**

In response to the coronavirus (COVID-1 9) outbreak in 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief, and Economic Security Act that, among other economic stimulus measures, established the Paycheck Protection Program (PPP) to provide small business loans. In May 2020, the Company obtained a PPP loan for $629,377 which is included in the Company's loan payable balance at December 31, 2020. The note matures May 2022 and bears interest at a fixed annual rate of 1 %, with the first six months of interest deferred. The Company applied and received a full forgiveness on first PPP loan on September 3, 2021, and the revenue of $629,377 was recognized in 2021.

In March 2021, the Company obtained a second PPP loan for $716,343 which is included in the Company's loan payable balance at December 31, 2021. The note matures March 2026 and bears interest at a fixed annual rate of 1%. The Company used the proceeds from the note for qualifying expenses and applied for forgiveness on July 15, 2022. Management expects to receive approval of its application for the loan to be forgiven in 2022, at which time the Company will recognize a gain on forgiveness of the loan.

**Note 9. RELATED PARTY TRANSACTIONS AND BALANCES:**

The Company has receivable from affiliates of 2,559,149 and $2,116,642 as of December 31, 2021 and December 31, 2020, respectively. The Company has payable to affiliates of $230,581 and $167,497 as of December 31, 2021 and December 31, 2020, respectively. Balances due from and due to related parties relate to working capital advances. The Company had an operating lease with an affiliate company through June 30, 2022. The amount paid to related party is $111,938 and $79,512 in 2021 and 2020, respectively.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31. 2021 AND DECEMBER 31. 2020</u>**

**Note 9. RELATED PARTY TRANSACTIONS AND BALANCES (Continued):**

The Company sold software technology to a related party for $84,530, the net book value of the technology in 2020.

The Company had a note payable of $2,400,000 with a related party, bearing interest rate of 2.75%, due December 31, 2021. The loan was paid off during 2021 with the proceeds received from line of cred it with First Republic Ban k (see Note 7).

**Note 10. MEMBERS' EQUITY:**

On August 20, 2015, Nylon Media, Inc. contributed substantially all of the assets and liabilities relating to the "Socialyte" business to a newly formed subsidiary, Socialyte, LLC, a Delaware limited liability company ("Socialyte, LLC") formed July 2015, in exchange for 6,500,000 Class A Units of Socialyte, LLC. At December 31, 2021 and December 31, 2020, 6,500,000 Class A units are outstanding.

Pursuant to the Amended and Restated Limited Liability Company Agreement of Socialyte, LLC (the "<u>Socialyte Operating Agreement</u>"), Socialyte, LLC may issue Profits Interest Units of Socialyte, LLC to its existing or new employees, officers, consultants, managers, investors or other providers of services to Socialyte, LLC or any of its subsidiaries pursuant to, and subject to the terms of, written agreements approved by Socialyte, LLC's board of managers (each, a "Socialyte Unit Issuance Agreement "). The Profits Interest Units of Socialyte, LLC are intended to constitute "profits interest," as such term is used by IRS Revenue Procedure 93-27, 1993-2 C.B. 343 and IRS Revenue Procedure 2001-43, 2001 -2 C.B. 191 for federal income tax purposes. Vesting terms of the Profits Interest Units of Socialyte, LLC are set forth in the applicable Socialyte Unit Issuance Agreement. Immediately prior to the issuance of each Profits Interest Unit of Socialyte, LLC, the Gross Asset Values (as defined in the Socialyte Operating Agreement) of all assets of Socialyte, LLC shall be adjusted to equal their respective fair market values in accordance with the terms set forth in the Socialyte Operating Agreement. Each Profits Interest Unit of Socialyte, LLC (a) shall entitle its record owner to share in the appreciation in the fair market value of Socialyte, LLC from the date of issuance of such Profits Interest Unit and not in any fair market value of Socialyte, LLC accrued prior to the issuance of such Profits Interest Unit, and (b) shall not be entitled to any retroactive allocation of the profits, losses, income, gains, deductions, cred its or other items of Socialyte, LLC.

During the year ended December 31, 2021 and 2020, no Profits Interest Units were issued. On December 31, 2021 and December 31, 2020, 7,010,089 Profit Interest Units are outstanding.

**Note 11. RETIREMENT PLAN:**

Effective September 1, 2019, the Company adopted a 40 l (k)-retirement savings plan which includes a discretionary employer-provided match covering substantially all full-time employees. The employees must attend age of 21 and complete three months of service to be eligible for employee deferrals. Eligible employees are automatically enrolled in the plan after satisfying the plan entry requirements, with 3% contribution, if not chosen otherwise. Employer contribution equals 50% on the first 4% of pay that employee elects to contribute, and subject to vesting schedule, with interest fully vested after completion of three years of service. For the years ended December 31, 2021 and December 31, 2020, the discretionary contribution was $56,601 and $61,292, respectively.

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31, 2021 AND DECEMBER 31, 2020</u>**

**Note 12. RESTATEMENT:**

As discussed in Note 1. Revenue Recognition, the Company has determined that it is more appropriate to reflect revenue net of amounts due to influencers and other. Accordingly, the presentation on the consolidated statement of operations has been revised. In addition, the Company discovered an error in the reporting of amount owed to influencers and others as compared to previously issued financial statements for the years ended December 31, 2021 and 2020. The impact is as follows:

Year ended December 31, 2021:

---

| | | | |
|:---|:---|:---|:---|
|  | As Previously<br>Reported |<br>Adjustment | Restated<br>2021 Balance |
| Accounts receivable. Net | $9661374 | $458401 | $10119775 |
| Accounts payable | 5570522 | 870216 | 6440738 |
| Accrued liabilities | 2242582 | 1178368 | 3420950 |
| Revenue | 34998541 | (26787804) | 8210737 |
| Cost of revenue | 27186788 | (27186788) |  |
| &nbsp;&nbsp;&nbsp;NET REVENUE | 7811753 | 398984 | 8210737 |
| OPERATING EXPENSES | 6042341 | 411815 | 6454156 |
| OTHER INCOM E (EXPENSES) | 327532 |  | 327532 |
| NET INCOME (LOSS) | 2096944 | (12831) | 2084113 |
| MEMBERS' EQUITY (Deficit). beginning of year | (660210) | (1716019) | (2376229) |
| MEMBERS' EQUITY (Deficit). end of year | $1436734 | $(1728850) | $(292116) |

---

Year ended December 31, 2020:

---

| | | | |
|:---|:---|:---|:---|
|  | As Previously<br>Reported |<br>Adjustment | Restated<br>2020 Balance |
| Accrued liabilities | $1216886 | $1577352 | $2794238 |
| Revenue | 22935549 | (17881866) | 5053683 |
| Cost of revenue | 17965269 | (17965269) |  |
| &nbsp;&nbsp;&nbsp;NET REVENUE | 4970280 | 83403 | 5053683 |
| OPERATING EXPENSES | 5064034 |  | 5064034 |
| OTHER INCOM E (EXPENSES) | (445642) |  | (445642) |
| NET INCOM E (LOSS) | (539396) | 83403 | (455993) |
| MEMBERS' EQUITY (Deficit). beginning of year | (120814) | (1799422) | (I,920,236) |
| MEMBERS' EQUITY (Deficit). end of year | $(660210) | $(1716019) | $(2376229) |

---

**SOCIALYTE, LLC AND ITS SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -**

**<u>DECEMBER 31, 2021 AND DECEMBER 31. 2020</u>**

**Note 13. COMMITMENTS:**

At December 31, 2021, the Company is liable for a long-term operating lease for real property with an affiliate company through June 2022. Remaining payments total $58,497.

Rental expenses under long-term lease obligations allocable to the Company were $111,938 and $79,512 and for the years ended December 31, 2021 and December 31, 2020, respectively.

**Note 14. SUBSEQUENT EVENTS:**

Management has evaluated subsequent events through January 27, 2023, the date which the financial statements were available to be issued.

On November 14, 2022, (the "Closing Date"), pursuant to a membership purchase agreement, NSL Ventures, LLC ("NSL "), the single member of Socialyte LLC ("Socialyte") sold 100% its membership interest in Socialyte to Dolphin Entertainment, Inc. ("Dolph in "), a Florida corporation. As consideration for the sale, NSL received $13 million and up to $5 million of additional consideration if certain financial targets are met in 2022. On the Closing Date, Dolphin paid NSL $5 million cash and issued 1,346,257 shares of its common stock, par value $0.015 trading on Nasdaq Capital Markets under the symbol DLPN (the "Common Stock"). Dolphin issued to NSL a $3 million unsecured promissory note to be repaid in two equal installments during the year ended December 31, 2023. In addition, NSL was issued 685,234 shares of Common Stock in satisfaction of the Closing Date working capital adjustment.

The sale of Socialyte was partially financed through a $3 million, five-year secured loan from Bank Prov in which Socialyte is a co-borrower ("Term Note"). The Term Note bears interest at a rate of 7.37% per annum and provides for monthly payments of principal plus interest commencing on December 14, 2022 for a period of five years. The Term Note contains clauses for prepayment penalties if the loan is prepaid during the first three years as well as other customary clauses. Prior to the Closing Date, NSL paid off the line of cred it with First Republic Bank.

## Exhibit 99.2

**EXHIBIT 99.2** 

**DOLPHIN ENTERTAINMENT, INC**

**UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of Dolphin Entertainment, Inc. and its wholly owned subsidiaries (hereinafter referred to as "Dolphin" or "the Company") and Socialyte, LLC ("Socialyte") after giving effect to Dolphin's acquisition of Socialyte that was completed on November 14, 2022 (the "Closing Date"). The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable.

The unaudited pro forma condensed combined balance sheet as of September 30, 2022 is presented as if the acquisition of Socialyte had occurred on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2021 and the nine months ended September 30, 2022 are presented as if the acquisition had occurred on January 1, 2021. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to reflect certain reclassifications to conform with current financial statement presentation.

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

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

Dolphin will finalize the acquisition accounting as soon as practicable within the required measurement period prescribed by Accounting Standards Codification ("ASC") 805, but in no event later than one year following the Closing Date. The unaudited pro forma condensed combined financial information has been presented for informational purposes only and should not be relied upon. The unaudited pro forma condensed combined financial information should be read in conjunction with Dolphin's historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 and quarterly financial statements on Form 10-Q for the nine months ended September 30, 2022 and the historical consolidated audited financial statements of Socialyte for the year ended December 31, 2021 and the historical unaudited financial statements of Socialyte for the nine months ended September 30, 2022 contained in this Form 8-K.

**Unaudited Pro Forma Condensed Combined Balance Sheet**

**As of September 30, 2022**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Dolphin Entertainment, Inc. (Historical) | Socialyte (Historical) | Pro Forma Adjustments | Notes | Pro Forma Combined |
| **<u>ASSETS</u>** |  |  |  |  |  |
| Current |  |  |  |  |  |
| Cash and cash equivalents | $4452562 | $205822 | $(2123000) | (a) | $2535384 |
| Restricted cash | 1140483 |  |  |  | 1140483 |
| Accounts receivable: |  |  |  |  |  |
| Trade, net | 4757499 | 3919324 |  |  | 8676823 |
| Other receivables | 2061845 |  |  |  | 2061845 |
| Notes receivable | 4323153 |  |  |  | 4323153 |
| Other current assets | 890645 | 216005 |  |  | 1106650 |
| Total current assets | 17626187 | 4341151 | (2123000) |  | 19844338 |
| Capitalized production costs, net | 1598412 |  |  |  | 1598412 |
| Employee receivable | 572085 |  |  |  | 572085 |
| Right-of-use asset | 7894850 |  |  |  | 7894850 |
| Goodwill | 20021357 | 321490 | 9324511 | (b) | 29667358 |
| Intangible assets, net | 5116568 |  | 5080000 | (c) | 10196568 |
| Property, equipment and leasehold improvements, net | 315004 | 30827 |  |  | 345831 |
| Other long-term assets | 2581005 | 2800704 | (2800704) | (d) | 2581005 |
| Total Assets | $55725468 | $7494172 | $9480807 |  | $72700447 |
| **<u>LIABILITIES</u>** |  |  |  |  |  |
| Current |  |  |  |  |  |
| Accounts payable | $1572855 | $2628590 | $— |  | $4201445 |
| Notes payable, current portion | 516036 |  | 3000000 | (e) | 3516036 |
| Contingent consideration | 500000 |  |  |  | 500000 |
| Term loan, current portion |  |  | 428571 | (e) | 428571 |
| Line of credit |  | 1500000 | (1500000) | (f) |  |
| Accrued interest - related party | 1650635 |  |  |  | 1650635 |
| Accrued compensation - related party | 2625000 |  |  |  | 2625000 |
| Loan from related party |  | 212577 | (212577) | (d) |  |
| Lease liability, current portion | 2033780 |  |  |  | 2033780 |
| Deferred revenue | 911970 | 1475742 |  |  | 2387712 |
| Other current liabilities | 5692600 | 1494069 |  |  | 7186669 |
| Total current liabilities | 15502876 | 7310978 | 1715994 |  | 24529848 |
| Notes payable | 380859 |  |  |  | 380859 |
| Convertible notes payable | 2400000 |  |  |  | 2400000 |
| Convertible notes payable at fair value | 420613 |  |  |  | 420613 |
| Term loan |  |  | 2502256 | (e) | 2502256 |
| Loan from related party | 1107873 |  |  |  | 1107873 |
| Contingent consideration | 205000 |  |  |  | 205000 |
| Lease liability | 6581512 |  |  |  | 6581512 |
| Deferred tax liability | 97879 |  |  |  | 97879 |
| Warrant liability | 30000 |  |  |  | 30000 |
| Other noncurrent liabilities | 18915 |  |  |  | 18915 |
| Total Liabilities | 26745527 | 7310978 | 4218250 |  | 38274755 |
| **<u>STOCKHOLDERS' EQUITY</u>** |  |  |  |  |  |
| Total Stockholders' Equity | $28979941 | $183194 | $5262557 | (g) | $34425692 |
| Total Liabilities and Stockholders' Equity | $55725468 | $7494172 | $9480807 |  | $72700447 |

---

See accompanying notes to the Unaudited Pro Forma Combined Financial Information

Unaudited Pro Forma Condensed Combined Statements of Operations

For the nine months ended September 30, 2022

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Dolphin Entertainment, Inc. (Historical) | Socialyte (Historical) | Pro Forma Adjustments | Notes | Pro Forma Combined |
| Revenues | $29366748 | $4625908 | $— |  | $33992656 |
| Operating expenses | 30975282 | 4835576 | 456795 | (c) | 36267653 |
| Loss from operations | (1608534) | (209668) | (456795) |  | (2274997) |
| Gain on extinguishment of debt |  | 716343 |  |  | 716343 |
| Change in fair value of convertible note | 577522 |  |  |  | 577522 |
| Change in fair value of warrants | 105000 |  |  |  | 105000 |
| Interest expense | (400884) | (31365) | (144856) | (e) | (577105) |
| (Loss) income before income taxes and equity in losses of unconsolidated affiliates | (1326896) | 475310 | (601651) |  | (1453237) |
| Income tax expense | (21672) |  |  |  | (21672) |
| (Loss) income before equity in losses of unconsolidated affiliates | (1348568) | 475310 | (601651) |  | (1474909) |
| Equity in losses of unconsolidated affiliates | (143623) |  |  |  | (143623) |
| Net (loss) income | $(1492191) | $475310 | $(601651) |  | $(1618532) |
| Loss Per Share: |  |  |  |  |  |
| Basic | $(0.16) |  |  | (i) | $(0.14) |
| Diluted | $(0.23) |  |  |  | $(0.20) |
| Weighted average number of shares used in per share calculation: |  |  |  |  |  |
| Basic | 9307830 |  |  |  | 11339249 |
| Diluted | 9437807 |  |  |  | 11469226 |

---

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

Unaudited Pro Forma Condensed Combined Statements of Operations

For the year ended December 31, 2021

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Dolphin Entertainment, Inc. (Historical) | Socialyte (Historical) | Pro Forma Adjustments | Notes | Pro Forma Combined |
| Revenues | $35727199 | $8210737 | $— |  | $43937936 |
| Operating expenses | 41230889 | 6454156 | 826645 | (c),(h) | 48511690 |
| (Loss) income from operations | (5503690) | 1756581 | (826645) |  | (4573754) |
| Gain on extinguishment of debt | 2988779 | 629377 |  |  | 3618156 |
| Change in fair value of convertible note | (570844) |  |  |  | (570844) |
| Change in fair value of warrants | (2482877) |  |  |  | (2482877) |
| Change in fair value of put rights | (71106) |  |  |  | (71106) |
| Other expenses |  | (205900) |  |  | (205900) |
| Interest expense | (785209) | (95945) | (249189) | (e) | (1130343) |
| (Loss) income before income taxes | (6424947) | 2084113 | (1075834) |  | (5416668) |
| Income tax expense | (37356) |  |  |  | (37356) |
| Net (loss) income | $(6462303) | $2084113 | $(1075834) |  | $(5454024) |
| Loss Per Share: |  |  |  |  |  |
| Basic | $(0.85) |  |  | (i) | $(0.57) |
| Diluted | $(0.85) |  |  |  | $(0.57) |
| Weighted average number of shares used in per share calculation: |  |  |  |  |  |
| Basic | 7614774 |  |  |  | 9640699 |
| Diluted | 7614774 |  |  |  | 9640699 |

---

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

**NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**NOTE 1 – DESCRIPTION OF THE TRANSACTION**

On the Closing Date, Dolphin, through its wholly-owned subsidiary Social MidCo, LLC ("MidCo"), acquired all of the issued and outstanding membership interest of Socialyte, a Delaware limited liability company, pursuant to a membership interest purchase agreement dated the Closing Date (the "Purchase Agreement"), between the Company and NSL Ventures, LLC, (the "Seller"). Socialyte is a NY and Los Angeles-based creative agency specializing in social media influencer marketing campaigns for brands.

The consideration paid by the Company in connection with the acquisition of Socialyte is $13,499,578, including working capital and cash adjustments pursuant to the Purchase Agreement of $1,869,697, plus the potential to earn up to an additional $5,000,000 upon completion of an earn-out based on meeting certain financial targets during the year ended December 31, 2022. On the Closing Date, the Company paid the Seller $5,053,827 cash, issued the Seller 1,346,257 shares of its Common Stock and issued the Seller a $3,000,000 unsecured promissory note, which is to be repaid in two equal installments on June 30, 2023 and September 30, 2023. In addition, the Company issued 685,234 shares of its Common Stock in satisfaction of the Closing Date working capital adjustment. The Company partially financed the cash portion of the consideration with a $3,000,000 five-year secured loan (the "Term Loan") from Bank Prov with MidCo and Socialyte as co-borrowers. The Company also entered into a guaranty of the Term Loan.

**NOTE 2 –BASIS OF PRO FORMA PRESENTATION**

The unaudited pro forma condensed combined balance sheet as of September 30, 2022, combines the historical consolidated balance sheet of Dolphin with the historical consolidated balance sheet of Socialyte and has been prepared as if the Socialyte acquisition had occurred on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2021 and the nine months ended September 30, 2022, combines the historical consolidated statement of operations of Dolphin with the historical consolidated statement of operations of Socialyte and was prepared as if the acquisition had occurred on January 1, 2021. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to reflect certain reclassifications to conform with current financial statement presentation.

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

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

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

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

**NOTE 3 – ESTIMATED PRELIMINARY PURCHASE PRICE CONSIDERATION**

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

---

| | |
|:---|:---|
| Closing Common Stock (2,031,491 shares, including 685,234 shares for a working capital adjustment, at a purchase price of $2.65, the September 30, 2022 closing stock price) | $5383451 |
| Cash paid at closing | 5053827 |
| Reimbursement of Seller transaction costs | 62300 |
| Cash to be paid in subsequent installments | 3000000 |
| Preliminary purchase price consideration | $13499578 |

---

**NOTE 4 – ESTIMATED PRELIMINARY PURCHASE PRICE ALLOCATION**

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

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

---

| | |
|:---|:---|
| Cash | $205822 |
| Accounts receivable | 3919324 |
| Other current assets | 216005 |
| Property, equipment and leasehold improvements | 30827 |
| Intangibles | 5080000 |
| Total identifiable assets acquired | 9451978 |
| Accrued payable | (2628590) |
| Accrued expenses and other current liabilities | (1494069) |
| Deferred revenue | (1475742) |
| Total liabilities assumed | (5598401) |
| Net identifiable assets acquired | 3853577 |
| Goodwill | 9646001 |
| Net assets acquired | $13499578 |

---

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheets as of September 30, 2022 and the statements of operations for the year ended December 31, 2021 and the nine months ended September 30, 2022. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (i) changes in allocations to intangible assets such as trade name and customer relationships, as well as goodwill and (ii) other changes to the assets and liabilities.

**NOTE 5 – FINANCING TRANSACTIONS**

***Term Loan***

On the Closing Date, Socialyte and MidCo, with Dolphin as guarantor, entered into a secured term loan, with a principal amount of $3,000,000, with BankProv, a Massachusetts Savings Bank, (the "Term Loan") to partially finance the cash portion of the acquisition of Socialyte. The Term Loan bears interest at a rate of 7.37% per annum and matures on November 14, 2027. Pursuant to the terms of the Term Loan, monthly payments of principal and interest began on December 14, 2022. The Term Loan contains customary representations and warranties and usual and customary affirmative and negative covenants.

The Company's obligations under the Term Loan are secured by a lien on substantially all of Socialyte's assets, pursuant to a credit and security agreement, dated as of the Closing Date.

The Company may prepay the Term Loan in whole or in part, upon at least a (3) day notice to Bank Prov, without premium or penalty, unless the prepayment is made as a result of a refinancing agreement that is not with Bank Prov. In that case, the prepayment will have a penalty of 3% if prepaid within the first year term, 2% if prepaid during the second year term and 1% if prepaid during the third year term.

 **

***Promissory Note***

 **

On the Closing Date, Dolphin, through MidCo, issued the Seller an unsecured promissory note for the balance of the cash portion of the purchase price of Socialyte. The unsecured promissory note is for a principal amount of $3,000,000, bears interest at 4% per annum and matures on September 30, 2023 (the "Promissory Note"). Pursuant to the terms of the Promissory Note, $1,500,000 is payable on June 30, 2023 and $1,500,000 is payable on September 30, 2023. The Promissory Note will accrue interest that will be payable on the installment dates and may be prepaid without penalties at any time prior to its maturity. The Promissory Note contains customary representations and warranties and usual clauses pertaining to defaults and remedies of defaults.

**NOTE 6 – PRO FORMA ADJUSTMENTS**

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

(a) Represents the $2,123,000 cash paid to the Seller by Dolphin on the Closing Date, calculated at the
$5,053,827 due under the purchase agreement, net of the $2,930,827 financed at closing, that was paid by Bank Prov directly to the Seller. See Note 5 for further
discussion on the Term Loan.

(b) The adjustment to goodwill of $9,324,511 represents the following:

(i) $9,646,001 of preliminary goodwill based on the excess of purchase consideration
of Socialyte and the preliminary fair value of the net identifiable assets acquired.

(ii) Write
off of $321,490 of unamortized goodwill from previous transactions undertaken by Socialyte.

In accordance with ASC 805, goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, we will record an expense for the amount impaired during the fiscal quarter in which the determination is made.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Closing Date Opening Balance | Estimated Useful Live (Years) | Annual Amortization | Quarterly Amortization |
| <u>Intangible assets:</u> |  |  |  |  |
| Customer relationships | $4930000 | 10 | Note (1) |  |
| Trade name | 150000 | 3 | 50000 | 12500 |
|  | $5080000 |  |  |  |

---

Note (1) - The Company amortizes customer relationships using an accelerated method in which a greater percentage of the customer relationship asset is amortized in the early years of the asset's useful life as the ability to generate revenue from this asset is greater in the beginning years. The amortization expense presented in these unaudited condensed combined proforma financial statements for the year ended December 31, 2021 and the nine months ended September 30, 2022, is $727,364 and $519,095, respectively.

(d) Represents $2,588,127 of net related party transactions. Prior to the Closing
Date and pursuant to the Purchase Agreement, all of the Company's related party transactions with the Seller were settled by the
Seller.

(e) The Company entered into a Term Loan in the amount of $3,000,000 and a
 Promissory Note in the amount of $3,000,000 to partially finance the cash portion of the acquisition of Socialyte. The Term Loan is
 presented net of loan origination fees in the amount of $69,173 that are being expensed as interest expense over the life of the
 Term Loan. For the year ended December 31, 2021 and the nine months ended September 30, 2022, the Company recorded interest expense
 (including the amortization of the loan origination fees) of $309,934 and $176,201, respectively on these unaudited condensed
 combined proforma financial statements. See Note 5 for further discussion on the Term Loan and the Promissory Note.

For the year ended December 31, 2021 and the nine months ended September 30, 2022, the Company reduced interest expense in the amount of $60,745 and $31,345, respectively for interest attributable to the First Republic line of credit paid off by the Seller prior to the Closing Date.

(f) Prior to the Closing Date, Socialyte had a line of credit with First Republic
Bank with an outstanding balance of $1,500,000. Pursuant to the terms of the Purchase Agreement and prior to the Closing Date, the Seller
repaid the balance of the line of credit.

(g) Adjustments to shareholders equity are as follows:

---

| | |
|:---|:---|
| Common Stock, par value of 2,031,491 shares issued on the Closing Date | $30472 |
| Additional paid in capital of Common Stock issued on the Closing Date | 5352979 |
| Total fair value of the equity of the Socialyte acquisition | 5383451 |
| Reimbursed transaction costs to the Seller | 62300 |
| Historical member equity of Socialyte | (183194) |
| Adjustment to shareholders equity | $5262557 |

---

(h) $99,281 represents the accrual for additional transaction costs incurred by the
Company subsequent to September 30, 2022. The remaining transaction costs of $250,760 are included in the historical consolidated statement
of operations for the nine months ended September 30, 2022.

(i) The Company recalculated loss per share as if the acquisition had taken place and shares had been issued
on January 1, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year ended** <br> **December 31, 2021** | **Year ended** <br> **December 31, 2021** | **Nine months ended**<br> **September 30, 2022** | **Nine months ended**<br> **September 30, 2022** |
|  | **Historical** | **Pro Forma** | **Historical** | **Pro Forma** |
| **Numerator** |  |  |  |  |
| Net loss attributable to Dolphin Entertainment common stock shareholders and numerator for basic loss per share | (6462303) | (5454024) | (1492191) | (1618532) |
| Change in fair value of convertible notes payable |  |  | (577522) | (577522) |
| Change in fair value of warrants |  |  | (105000) | (105000) |
| Interest expense |  |  | 29589 | 29589 |
| Numerator for diluted loss per share | $(6462303) | $(5454024) | $(2145124) | $(2271465) |
| **Denominator** |  |  |  |  |
| Denominator for basic LPS - weighted-average shares | 7614774 | 9640699 | 9307830 | 11339249 |
| Effect of dilutive securities: |  |  |  |  |
| Warrants |  |  | 2100 | 2100 |
| Convertible notes payable |  |  | 127877 | 127877 |
| Denominator for diluted LPS - adjusted weighted-average shares | 7614774 | 9640699 | 9437807 | 11469226 |
| Basic loss per share | $(0.85) | $(0.57) | $(0.16) | $(0.14) |
| Diluted loss per share | $(0.85) | $(0.57) | $(0.23) | $(0.20) |

---