Dolphin Entertainment (DLPN) Risk Analysis

Our common stock is listed on the Nasdaq Capital Market. We cannot assure you, that we will be able to maintain compliance with Nasdaq's current listing standards, or that Nasdaq will not implement additional listing standards with which we will be unable to comply. Failure to maintain compliance with Nasdaq listing requirements could result in the delisting of our shares from Nasdaq, which could have a material adverse effect on the trading price, volume and marketability of our common stock. Furthermore, a delisting could adversely affect our ability to issue additional securities and obtain additional financing in the future or result in a loss of confidence by investors or employees.

The Series C Convertible Preferred Stock is held by Dolphin Entertainment LLC, an entity owned by Mr. O'Dowd. As of December 31, 2023, Series C Preferred Stock is convertible into 4,738,940 shares of our common stock. A stock restriction agreement entered into with Mr. O'Dowd in 2020 prohibits the conversion of Series C Convertible Preferred Stock into common stock unless the majority of the independent directors of the Board vote to remove the restriction. The stock restriction agreement will be immediately terminated upon a change of control as defined in the agreement. On September 27, 2022, the Company's shareholders approved an amendment to the terms of the Series C Convertible Preferred Stock included in our Articles of Incorporation to increase the number of votes per share of common stock the Series C is convertible into from three votes per share to five votes per share. As of December 31, 2023, the Series C Preferred Stock is entitled to 23,694,699 votes which is approximately 57% of our voting securities. The holder of Series C Convertible Preferred Stock is entitled to vote together as a single class on all matters upon which common shareholders are entitled to vote. Your voting rights will be diluted as a result of these super voting rights.

From January 1, 2022 to December 31, 2023, the number of shares of our common stock issued and outstanding has increased from 8,020,381 to 18,219,531 shares. During this period, we issued approximately (i) 5.1 million aggregate shares of our common stock as consideration or earnout consideration for acquisitions; (ii) 2.8 million to Lincoln Park Capital Fund LLC related to our purchase agreement with them; (iii) 1.4 million shares through an offering pursuant to a Registration Statement on Form S-3; (iv) 0.6 million to certain holders of convertible notes that exercised their right to convert all or a portion of their convertible notes; and (v) 0.2 million as stock compensation to certain employees. As of December 31, 2023, we had outstanding convertible notes payable that as of the date of this report are still outstanding in the aggregate principal amount of $5.1 million, which are convertible using a 90-day trading average stock price. As a result of these past issuances and potential future issuances, your ownership interest in the Company has been, and may in the future be, substantially diluted. The market price for our common stock has been volatile, and these issuances could cause the price of our common stock to continue to fluctuate substantially. Once restricted stock issued in either private placements or to the sellers of the companies we acquired becomes freely tradable, these shareholders may decide to sell their shares of common stock and, if our stock is thinly traded, this could have a material adverse effect on its market price. We may need to raise additional capital and may seek to do so by conducting one or more private placements of equity securities, securities convertible into equity securities or debt securities, or through a combination of one or more of such financing alternatives. Such issuances of additional securities would further dilute the equity interests of our existing shareholders, perhaps substantially, and may further exacerbate any or all of the above risks.