Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following management's discussion and analysis together with our unaudited condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q, together with the audited consolidated financial statements, the accompanying notes, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the "Risk Factors" section of our Annual Report on Form 10-K and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC.

Overview

We are a leading independent entertainment marketing and production company. We were first incorporated in the State of Nevada on March 7, 1995 and domesticated in the State of Florida on December 4, 2014. Our common stock trades on The Nasdaq Capital Market under the symbol "DLPN."

Through our subsidiaries, 42West LLC ("42West"), The Door Marketing Group LLC ("The Door"), Shore Fire Media, Ltd ("Shore Fire"), Elle Communications, LLC ("Elle"), The Digital Dept, LLC ("The Digital Dept.") and Special Projects Media, LLC ("Special Projects") we provide expert strategic marketing and publicity services to many of the top brands, both individual and corporate, in the motion picture, television, music, gaming, culinary, hospitality, lifestyle and charitable industries. 42West (Film and Television, Gaming), Shore Fire (Music), The Door (Culinary, Hospitality, Lifestyle) and Elle (Impact, Philanthropy, Non-Profit) are each recognized global public relations and marketing leaders for the industries they serve. As a group, they were recognized as the #1 PR firm in the country in the prestigious Observer rankings in 2025. The Digital Dept. provides influencer marketing capabilities through divisions dedicated to influencer talent management, brand campaign strategy and execution, and influencer event ideation and production. Dolphin's legacy content production business, Dolphin Films, founded by our Emmy-nominated Chief Executive Officer, Bill O'Dowd, has produced multiple feature films and award-winning digital series, primarily aimed at family and young adult markets.

We have established an acquisition strategy based on identifying and acquiring companies that complement our existing entertainment publicity and marketing services and content production businesses. We believe that complementary businesses can create synergistic opportunities and bolster profits and cash flow. While we may acquire additional companies in the future, we are not in active negotiations with any such companies, and there is no assurance that we will be successful in acquiring any additional companies, whether in 2026 or at all.

We have also established an investment strategy, "Ventures" or "Dolphin 2.0," based upon identifying opportunities to develop internally owned assets, or acquire ownership stakes in others' assets, in the categories of entertainment content, live events and consumer products. We believe these categories represent the types of assets wherein our expertise and relationships in entertainment marketing most influences the likelihood of success. We are in various stages of internal development and outside conversations on a wide range of opportunities within these Ventures. We intend to enter into Venture investments during 2026, but there is no assurance that we will be successful in doing so, whether in 2026 or at all.

HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are revenues, direct costs, payroll and benefits, selling, general and administrative expenses, legal and professional expenses, other income/expense and net income. Other income/expense consists mainly of interest expense, interest income and non-cash changes in fair value of liabilities,

We operate in two reportable segments: our entertainment publicity and marketing segment and our content production segment. The entertainment publicity and marketing segment is composed of 42West, The Door, Shore Fire, The Digital Dept., Special Projects, and Elle, and provides clients with diversified services, including public relations, entertainment content marketing, strategic communications, influencer marketing, celebrity booking and live event production. The content production segment is composed of Dolphin Films and Dolphin Digital Studios, which produce and distribute feature films and digital content.

Entertainment Publicity and Marketing ("EPM")

Our revenue is directly impacted by the retention and spending levels of existing clients and by our ability to win new clients. We believe that we have a stable client base, and we have continued to grow organically through referrals and by actively soliciting new business. We earn revenues primarily from the following sources: (i) celebrity talent services; (ii) content marketing services under multiyear master service agreements in exchange for fixed project-based fees; (iii) individual engagements for entertainment content marketing services for durations of generally between three and six months; (iv) strategic communications services; (v) engagements for marketing of special events such as food and wine festivals; (vi) engagement for marketing of brands; (vii) arranging strategic marketing agreements between brands and social media influencers or celebrities and (viii) curating and booking celebrities for live events. For these revenue streams, we collect fees through either fixed fee monthly retainer agreements, fees based on a percentage of contracts or project-based fees.

We earn entertainment publicity and marketing revenues primarily through the following:

Talent - We earn fees from creating and implementing strategic communication campaigns for performers and entertainers, including Oscar, Tony and Emmy winning film, theater and television stars, directors, producers, celebrity chefs and Grammy winning recording artists. Our services in this area include ongoing strategic counsel, media relations, studio and/or network liaison work, and event and tour support. We believe that the proliferation of content, both traditional and on social media, will lead to an increasing number of individuals seeking such services, which will drive growth and revenue in our Talent departments for several years to come.

Entertainment Marketing and Brand Strategy - We earn fees from providing marketing direction, public relations counsel and media strategy for entertainment content (including theatrical films, television programs, DVD and VOD releases, and online series) from virtually all the major studios and streaming services, as well as content producers ranging from individual filmmakers and creative artists to production companies, film financiers, DVD distributors, and other entities. In addition, we provide entertainment marketing services in connection with film festivals, food and wine festivals, awards campaigns, event publicity and red-carpet management. As part of our services, we offer marketing and publicity services tailored to reach diverse audiences. We also provide marketing direction targeted to the ideal consumer through a creative public relations and creative brand strategy for hotel and restaurant groups.

Strategic Communications - We earn fees by advising companies looking to create, raise or reposition their public profiles, primarily in the entertainment industry. We also help studios and filmmakers deal with controversial movies, as well as high-profile individuals address sensitive situations. We believe that growth in the Strategic Communications division will be driven by increasing demand for these varied services by traditional and non-traditional media clients who are expanding their activities in the content production, branding, and consumer products PR sectors.

Digital Media Influencer Marketing Campaigns - We arrange strategic marketing agreements between brands and social media influencers, for both organic and paid campaigns. We also offer services for social media activations at events. Our services extend beyond our own captive influencer network, and we manage custom campaigns targeting specific demographics and locations, from ideation to delivery of results reports. We expect that our relationship with social media influencers will provide us the ability to offer these services to our existing clients in the entertainment and consumer products industries and will be accretive to our revenue.

Celebrity Booking and Live Event Programming - We arrange for brands and events to book celebrity and influencer talent. Our services include the creation of the strategy to elevate the brand or event through celebrity and/or influencer inclusion, to the booking of celebrities and influencers for commercial endorsements or appearances, to the curation of event lists and securing attendance, to the coordination and production of live events. We believe the expansion of brands seeking celebrity and/or influencer endorsements, as well as celebrity and/or influencers to attend brand-sponsored live events, will drive growth and revenue for the next several years.

Content Production ("CPD")

Project Development and Related Services

We have a team that dedicates a portion of its time to identifying scripts, story treatments and novels for acquisition, development and production. The scripts can be for either digital, television or motion picture productions. We have acquired the rights to certain scripts that we intend to produce and release in the future, subject to obtaining financing. We have not yet determined if these projects would be produced for digital, television or theatrical distribution.

We have completed development of several feature films, which means that we have completed the script and can begin pre-production once financing is obtained. We are planning to fund these projects through third-party financing arrangements, domestic distribution advances, pre-sales, and location-based tax credits, and if necessary, sales of our common stock, securities convertible into our common stock, debt securities or a combination of such financing alternatives; however, there is no assurance that we will be able to obtain the financing necessary to produce any of these feature films.

During the three months ended March 31, 2026, we entered into an agreement with YB Aircraft Productions Inc. ("YB") to acquire the licensing rights to distribute Youngblood movie worldwide, with the exception of Canada, and agreed to pay YB a guaranteed, non-refundable advance of $700,000, payable in two equal installments of $350,000 each, on August 31, 2026 and February 28, 2027. The $700,000 advance to YB was recorded in direct costs in our condensed consolidated statement of operations for the three months ended March 31, 2026. We also entered into a distribution agreement with Well Go USA, Inc. ("Well Go") to distribute the film across all media in the United States. The agreement provides for a $450,000 guaranteed, non-refundable advance against the revenues from distribution of Youngblood upon delivery of the film to Well Go. The film was released in theaters on March 6, 2026 and the Company recorded revenues of $450,000 from the minimum guaranteed advance for the three months ended March 31, 2026.

Revenues

For the three months ended March 31, 2026 and 2025, we derived a majority of our revenues from our entertainment publicity and marketing segment. During the three months ended March 31, 2026, we generated income in our content production segment related to Youngblood.

The table below sets forth the percentage of total revenue derived from our segments for the three months ended March 31, 2026 and 2025:

		Three Months Ended March 31,
		2026				2025
Revenues:
Entertainment publicity and marketing			96.4	%			99.2	%
Content production			3.6	%			0.8	%
Total revenue			100	%			100	%

Expenses

Our expenses consist primarily of:

(1)

Direct costs - include certain costs of services, as well as certain production costs, related to our entertainment publicity and marketing business. Direct costs also includes the minimum guarantee of $700,000 that we agreed to pay YB for the distribution rights of Youngblood as discussed above.

(2)

Payroll and benefits expenses - includes wages, stock-based compensation, payroll taxes and employee benefits.

(3)

Selling, general and administrative expenses - includes all overhead costs except for payroll, depreciation and amortization and legal and professional fees that are reported as a separate expense item.

(4)

Acquisition costs - includes agreed upon payment to the sellers of Special Projects for the three months ended March 31, 2025.

(5)

Depreciation and amortization - includes the depreciation of our property and equipment and amortization of intangible assets and leasehold improvements.

(6)

Legal and professional fees - includes fees paid to our attorneys, fees for investor relations consultants, audit and accounting fees and fees for general business consultants.

Other Income and Expenses

For the three months ended March 31, 2026 and 2025, other income and expenses consisted primarily of: (1) changes in fair value of convertible notes and (2) interest expense, net.

RESULTS OF OPERATIONS

Three months ended March 31, 2026 as compared to three months ended March 31, 2025

Revenues

For the three months ended March 31, 2026 and 2025 revenues were as follows:

		For the Three Months Ended March 31,
Revenues:		2026				2025
Entertainment publicity and marketing		$	12,348,245			$	12,077,678
Content production			455,692				92,033
Total Revenues		$	12,803,937			$	12,169,711

Revenues from entertainment publicity and marketing increased by approximately $0.3 million for the three months ended March 31, 2026, respectively, as compared to the same period in the prior year. The increase for the three months ended March 31, 2026, in revenue is attributed to organic growth across substantially all of our subsidiaries.

Revenues from content production increased by approximately $0.4 million during the three months ended March 31, 2026, compared to the same period in the prior year. The increase was related to revenue from the distribution of Youngblood which was released in theaters on March 6, 2026. During the three months ended March 31, 2025, we recognized $0.1 million from the Believe film released in 2013.

Expenses

For the three months ended March 31, 2026 and 2025, our expenses were as follows:

		For Three Months Ended March 31,
		2026				2025
Expenses:
Direct costs		$	784,650			$	344,414
Payroll and benefits			10,715,144				10,304,233
Selling, general and administrative			2,047,161				1,772,444
Acquisition costs			-				416,171
Depreciation and amortization			537,276				591,552
Legal and professional			856,138				514,424
Total expenses		$	14,940,369			$	13,943,238

Direct costs increased by approximately $0.4 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase in direct costs for the three months ended March 31, 2026 is primarily attributable to a minimum guaranteed payment of $0.7 million to YB for the practically worldwide (excluding Canada) distribution rights of Youngblood, which was released in theatres on March 6, 2026, offset by a decrease in production costs of events in our EPM segment of approximately $0.3 million.

Payroll and benefits expenses increased by approximately $0.4 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to $0.8 million increase in workforce and employee cost of living pay increases. This increase was offset by the exclusion of $0.4 million of Always Alpha payroll and benefits. Always Alpha was sold in November 2025.

Selling, general and administrative expenses increased by approximately $0.3 million, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase is mainly due to $0.1 increase in bad debt expense and $0.1 million increase in dues and subscriptions and computer expense.

Acquisition costs for the three months ended March 31, 2025 were $0.4 million, related to an agreed upon payment with the sellers of Special Projects related to the working capital adjustment. There was no acquisition costs recorded for the three months ended March 31, 2026.

Depreciation and amortization remained consistent for the three months ended March 31, 2026 as compared to the three ended March 31, 2025.

Legal and professional fees increased by $0.3 million for the three months ended March 31, 2026, as compared to same period of the prior year. The increase is primarily due to the litigation with the sellers of Socialyte. Refer to Note 12 to the condensed consolidated financial statements elsewhere on this Quarterly Report on Form 10-Q for additional information.

Other Expenses

		Three Months Ended March 31
		2026				2025
Other (expense) and income:
Change in fair value of convertible note		$	10,000			$	20,000
Interest expense, net			(547,950	)			(554,013	)
Total		$	(537,950	)		$	(534,013	)

Change in fair value of convertible notes - We elected the fair value option for one convertible note payable issued in 2020. The fair value of this convertible note payable is remeasured at every balance sheet date and any changes are recorded on our condensed consolidated statements of operations. For the three months ended March 31, 2026 and 2025, we recorded a gain in the change in fair value of the convertible note payable issued in 2020 in the amount of $10.0 thousand and $20.0 thousand, respectively. None of the decrease in the value of the convertible note was attributable to instrument specific credit risk and as such, all the gain or loss in the change in fair value was recorded within net loss.

Interest expense, net - Interest expense, net remained consistent for the three months ended March 31, 2026 and 2025.

Income Taxes

We recorded an income tax expense of approximately $17.7 thousand for the three months ended March 31, 2026, respectively, and approximately $21.5 thousand for the three months ended March 31, 2025, respectively, which reflects the accrual of a valuation allowance in connection with the limitations of our indefinite lived tax assets to offset our indefinite lived tax liabilities. To the extent the tax assets are unable to offset the tax liabilities, we have recorded a deferred expense for the tax liability (a "naked credit").

Net Loss

Net loss was approximately $2.7 million or $(0.22) per share based on 12,327,974 weighted average shares outstanding for both basic loss per share and fully diluted loss per share, for the three months ended March 31, 2026. Net loss was approximately $2.3 million or $(0.21) per share based on 11,162,026 weighted average shares outstanding for both basic loss per share and fully diluted loss per share, for the three months ended March 31, 2025. The change in net loss for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, is related to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

		Three Months Ended March 31,
		2026				2025
Statement of Cash Flows Data:
Net cash used in operating activities		$	(2,041,711	)		$	(1,703,425	)
Net cash used in investing activities			(1,850	)			(1,088	)
Net cash (used in) provided by financing activities			(429,167	)			585,931
Net decrease in cash and cash equivalents and restricted cash			(2,472,728	)			(1,118,582	)
Cash and cash equivalents and restricted cash, beginning of period			9,681,589				9,128,846
Cash and cash equivalents and restricted cash, end of period		$	7,208,861			$	8,010,264

Operating Activities

Cash used in operating activities was $2.0 million for the three months ended March 31, 2026, a change of $0.3 million from cash used in operating activities of $1.7 million for three months ended March 31, 2025. The increase in cash used in operating activities was primarily a result of a $0.4 million increase in net loss for the period, and the net change in working capital.

Investing Activities

Cash flows used in investing activities for the three months ended March 31, 2026 and 2025 were inconsequential.

Financing Activities

Cash flows used in financing activities for the three months ended March 31, 2026 were $0.4 million, which mainly related to:

Inflows:

·

$50.0 thousand of proceeds from convertible notes payable.

Outflows:

·

$0.4 million of repayment of existing term loan and;

·

$31.0 thousand of repayment of finance leases.

Cash flows provided by financing activities for the three months ended March 31, 2025 were $0.6 million which mainly related to:

Inflows:

·

$0.8 million of proceeds from convertible notes payable and;

·

$0.3 million of proceeds from nonconvertible notes payable.

Outflows:

·

$0.4 million of repayment of existing term loan and;

·

$21.0 thousand of repayment of finance leases.

Debt and Financing Arrangements

Total debt amounted to $23.8 million as of March 31, 2026, compared to $24.5 million as of December 31, 2025, a decrease of $0.7 million, primarily related to the conversion of three convertible notes and the repayment of the term loan.

Our debt obligations in the next twelve months from March 31, 2026 increased to $7.3 million from $7.0 million in December 31, 2025, mainly related to an increase in the current portion of the Bank United Credit Facility (defined below in "BankUnited Loan Agreements - Refinancing Transaction") in the amount of $40.0 thousand and a net increase in the current portion of convertible and nonconvertible notes payable in the amount of $0.3 million. We expect our current cash position, cash expected to be generated from our operations and other availability of funds, as detailed below, to be sufficient to meet our debt requirements.

2025 Lincoln Park Transaction

On August 12, 2025, we entered into a purchase agreement (the "2025 LP Purchase Agreement") with Lincoln Park Capital Fund, LLC ("Lincoln Park" or "Investor"), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $15,000,000 of shares (the "Purchase Shares") of our common stock, par value $0.015 per share, over the thirty-six (36) month term of the 2025 LP Purchase Agreement. Concurrently with entering into the 2025 LP Purchase Agreement we also entered into a registration rights agreement with Lincoln Park, pursuant to which we agreed to provide Lincoln Park with certain registration rights related to the shares issued under the 2025 LP Purchase Agreement (the "2025 LP Registration Rights Agreement"). On October 3, 2025, we filed a new Registration Statement on Form S-1 (the "Registration Statement" with the Securities Exchange Commission (the "SEC") covering the resale of our common stock in accordance with the terms of the 2025 LP Registration Rights Agreement. The registration statement became effective on December 1, 2025.

For the three months ended March 31, 2026, we did not sell any shares of common stock to Lincoln Park under the 2025 LP Purchase Agreement.

Convertible Notes Payable

During the three months ended March 31, 2026 and 2025 we issued one and six convertible notes payable and received proceeds of $50,000 and $775,000, respectively. As of March 31, 2026, we had twenty-nine convertible notes payable outstanding. The convertible notes payable bear interest at a rate of 10% per annum, with initial maturity dates ranging between the second anniversary and the sixth anniversary of their respective issuances.

The balance of each convertible notes payable and any accrued interest may be converted at the noteholder's option at any time at the following conversion prices:

Aggregate Convertible Notes balance			Conversion Price	Floor/Conversion Price
$	2,700,000		90-day average closing market price of our common stock	$	5.00
	900,000		90-day average closing market price of our common stock	$	4.00
	100,000		30-day average closing market price of our common stock	$	1.01
	325,000		Fixed conversion price	$	1.11
	100,000		Fixed conversion price	$	1.02
	50,000		Fixed conversion price	$	1.01
	1,650,000		Fixed conversion price	$	1.07
	125,000		Fixed conversion price	$	1.03
	500,000		Fixed conversion price	$	1.00
	100,000		Fixed conversion price	$	1.16
	200,000		Fixed conversion price	$	1.04
	350,000		Fixed conversion price	$	1.28
	100,000		Fixed conversion price	$	1.32
	100,000		Fixed conversion price	$	1.67
	50,000		Fixed conversion price	$	1.60
	100,000		Fixed conversion price	$	1.25
$	7,450,000

As of March 31, 2026 the principal balance of $1,550,000 and $5,900,000 related to the convertible notes payable was recorded in current and noncurrent liabilities, respectively, on its condensed consolidated balance sheet under the caption convertible notes payable. As of December 31, 2025 the principal balance of $1,250,000 and $6,460,000 related to the convertible notes payable was recorded in current and noncurrent liabilities, respectively, on its condensed consolidated balance sheet under the caption convertible notes payable.

On January 26, 2026, March 9, 2026 and March 18, 2026, three holders of three convertible notes payable with an aggregate principal balance of $310,000 converted the full principal amount of each of the convertible promissory notes payable into an aggregate of 291,672 shares of our common stock, pursuant to the provisions of their respective convertible notes payable. On January 8, 2026, we issued a convertible note payable in the amount of $50,000 and received proceeds of $50,000. The note bears interest at a rate of 10% per annum, may be converted at a price of $1.60 per share and matures on the fourth anniversary of its issuance date. On May 1, 2026, the holder of two convertible promissory notes converted the aggregate principal balance of $500,000 and accrued interest of $4,167 into 504,167 shares of our common stock pursuant to the convertible notes payable.

We recorded interest expense related to these convertible notes payable of $191,136 and $136,000 during the three months ended March 31, 2026 and 2025, respectively. In addition, we made cash interest payments amounting to $192,528 and $129,556, respectively, during the three months ended March 31, 2026 and 2025, related to the convertible notes payable.

Convertible Note Payable at Fair Value

We had one convertible promissory note outstanding with aggregate principal amount of $500,000 as of March 31, 2026 for which it elected the fair value option. As such, the estimated fair value of the note was recorded on its issue date. At each balance sheet date, we record the fair value of the convertible promissory note with any changes in the fair value recorded in the condensed consolidated statements of operations.

We had a balance of $260,000 and $270,000 in noncurrent liabilities as of March 31, 2026, and December 31, 2025, respectively, on our condensed consolidated balance sheets related to the convertible promissory note payable measured at fair value.

We recorded a gain in fair value of $10,000 and $20,000 for the three months ended March 31, 2026 and 2025, respectively, on our condensed consolidated statements of operations related to this convertible promissory note at fair value.

We recorded interest expense related to this convertible note payable at fair value of $9,863 for both the three months ended March 31, 2026 and 2025. In addition, we made cash interest payments amounting to $9,863 for both the three months ended March 31, 2026 and 2025, related to the convertible note payable at fair value.

Nonconvertible Promissory Notes

During the three months ended March 31, 2025, we issued a nonconvertible promissory note and received proceeds $250,000. We did not issue new nonconvertible promissory notes during the three months ended March 31, 2026. As of March 31, 2026, we had eleven outstanding unsecured nonconvertible promissory notes in the aggregate amount of $5,080,000, which bear interest at a rate of 10% per annum and mature between November 2026 and October 2030.

As of both March 31, 2026 and December 31, 2025, we had a balance of $500,000, recorded as current liabilities and $4,580,000 in noncurrent liabilities on our condensed consolidated balance sheets related to these unsecured nonconvertible promissory notes.

We recorded interest expense related to these nonconvertible promissory notes of $127,000 and $99,083 for the three months ended March 31, 2026 and 2025, respectively. We made interest payments of $125,778 and $97,000 for the three months ended March 31, 2026 and 2025, respectively, related to the nonconvertible promissory notes.

Nonconvertible Unsecured Promissory Note - Socialyte Promissory Note

In connection with the purchase agreement for the acquisition of Socialyte ("Socialyte Purchase Agreement"), we entered into a promissory note with the sellers of Socialyte ("the Socialyte Promissory Note") amounting to $3,000,000. The Socialyte Promissory Note matured on September 30, 2023 and was payable in two payments: $1,500,000 on June 30, 2023 and $1,500,000 on September 30, 2023. The Socialyte Promissory Note carries an interest of 4% per annum, which accrues monthly, and all accrued interest was to be due and payable on September 30, 2023.

The Socialyte Purchase Agreement allows us to offset a working capital deficit against the Socialyte Promissory Note. As such, we deferred these installment payments until the final post-closing working capital adjustment is agreed upon with the seller of Socialyte. We filed a lawsuit against the seller of Socialyte and certain of its principals related to the Socialyte Purchase Agreement. See Note 12 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We recorded interest expense related to this Socialyte Promissory Note of $30,000 for the three months ended March 31, 2026 and 2025, respectively. No interest payments were made during the three months ended March 31, 2026 and 2025, related to the Socialyte Promissory Note.

Nonconvertible Promissory Note from Related Parties

On June 21, 2021, we issued Dolphin Entertainment LLC ("DE LLC"), an entity wholly owned by our CEO, Bill O'Dowd, a nonconvertible promissory note with a principal balance of $1,107,873 which was to mature on December 31, 2026. On April 29, 2024 and June 10, 2024, we issued two nonconvertible promissory notes to DE LLC in the amounts of $1,000,000 and $135,000, respectively, which were to mature on April 29, 2029 and June 10, 2029, respectively, (collectively, "the DE LLC Notes"). The DE LLC Notes each bore interest at a rate of 10% per annum.

On May 12, 2025, we entered into an exchange agreement (the "Exchange Agreement") with DE LLC, pursuant to which, we and DE LLC agreed to exchange the three DE LLC Notes in the aggregate principal amount of $2,242,873 currently held by DE LLC for three convertible promissory notes (the "DE New Notes") in the same principal amounts. As consideration for the exchange, we and DE LLC agreed to extend the maturity dates on each of the notes by six months. One note, with a principal balance of $1,107,873 now matures on June 30, 2027, one note with a principal balance of $1,000,000 now matures on October 29, 2029 and one note with a principal balance of $135,000, now matures on December 10, 2029. The DE New Notes continue to bear interest at a rate of 10% per annum. DE LLC may convert the principal balance of the DE New Notes and any accrued interest thereon at any time before the maturity date of the DE New Notes into our common stock at a conversion price of $1.00 per share. We accounted for this exchange as an extinguishment of debt and recorded the difference between the carrying value of DE LLC Notes and the fair value of the DE New Notes of $0.8 million as a loss from extinguishment of debt in our condensed consolidated statement of operations for the year ended December 31, 2025.

As of March 31, 2026 and December 31, 2025, we had an aggregate principal balance of $2,839,556 and $2,904,357, respectively, related to the DE New Notes under the caption convertible note payable - related party in our condensed consolidated balance sheets. During the three months ended March, 31, 2026 and 2025, we did not repay any principal balance or make interest payments on the DE LLC Notes or DE New Notes.

We recorded interest expense of $55,304 for both the three months ended March 31, 2026 and 2025 related to the DE LLC Notes and the DE New Notes. As of March 31, 2026 and December 31, 2025, we had a balance in accrued interest - related parties of $543,358 and $488,054, respectively, on our condensed consolidated balance sheets related to the DE LLC Notes.

Mock Notes

During 2024, we issued three nonconvertible promissory notes to Mr. Donald Scott Mock, the brother of Mr. O'Dowd, in the amount of $900,000, $75,000 and $8,112, respectively, and received proceeds of $983,112. The Mock Notes bear interest at a rate of 10% per annum and mature on January 16, 2029, May 28, 2029 and December 30, 2029, respectively.

As of both March 31, 2026 and December 31, 2025, we had a principal balance of $983,112 related to the Mock Notes under the caption loans from related party in our condensed consolidated balance sheets. For the three months ended March 31, 2026 and 2025, we did not repay any principal balance on the Mock Notes. During the three months ended March 31, 2026, we made interest payments in the amount of $24,578 related to the Mock Notes. No interest payments were made during the three months ended March 31, 2025 related to the Mock Notes.

We recorded interest expense of $24,578 for both the years ended December 31, 2025 and 2024 related to the Mock Notes. As of March 31, 2026 and December 31, 2025, we had a balance in accrued interest - related parties of $188,728 on our condensed consolidated balance sheets related to the Mock Notes.

BankUnited Loan Agreement

On September 29, 2023, we entered into a loan agreement with BankUnited ("BankUnited Loan Agreement") in which an existing term loan with BankProv was repaid (the "Refinancing Transaction"). The BankUnited Loan Agreement includes: (i) $5,800,000 secured term loan ("First BKU Term Loan"), (ii) and $750,000 of a secured revolving line of credit ("BKU Line of Credit") and (iii) $400,000 Commercial Card ("BKU Commercial Card"). The First BKU Term Loan carries a 1.0% origination fee and matures in September 2028, the BKU Line of Credit carries an initial origination fee of 0.5% and a 0.25% fee on each annual anniversary and matures in September 2026; the BKU Commercial Card does not have any initial or annual fee and matures in September 2026. The First BKU Term Loan has a declining prepayment penalty equal to 5% in year one, 4% in year two, 3% in year three, 2% in year four and 1% in year five of the outstanding balance. The BKU Line of Credit and BKU Commercial Card can be repaid without any prepayment penalty.

On December 6, 2024, we entered into a second Bank United Loan Agreement ("Second BKU Term Loan") for $2.0 million to finance the acquisition of Elle Communications, LLC. The Second BKU Term Loan carries a 1.0% origination fee and matures in December 2027. Similar to the First BKU Term Loan, the Second BKU Term Loan has a declining prepayment penalty equal to 3% in year one, 2% in year two and 1% in year three of the outstanding balance. (The First BKU Term Loan, Second BKU Term Loan, BKU Line of Credit and BKU Commercial Card are collectively referred to as the "Bank United Credit Facility").

Interest accrues at 8.10% fixed rate per annum on the First BKU Term Loan and 7.10% fixed rate per annum on the Second BKU Term Loan. Principal and interest are payable on a monthly basis based on a 5-year amortization for the First BKU Term Loan and 3-year amortization for the Second BKU Term Loan. Interest on the BKU Line of credit is payable on a monthly basis, with all principal due at maturity. The BKU Commercial Card payment is due in full at the end of each bi-weekly billing cycle. During the three months ended March 31, 2026 and 2025, we did not used the BKU Commercial Card. During the three months ended March 31, 2026 and 2025, we made payments in the amount of $354,621, inclusive of $68,625 and $90,722 of interest related to the First BKU Term Loan, respectively. During the three months ended March 31, 2026 and 2025, we made payments in amount of $185,995, inclusive of $23,827 and $32,187, respectively, of interest related to the Second BKU Term Loan.

Interest on the BKU Line of Credit is variable based on the Lender's Prime Rate. During the three months ended March 31, 2026 and 2025, the Company recorded interest expense and made payments of $6,778 and $7,550, respectively, related to the BKU Line of Credit.

As of March 31, 2026, we had a balance of $1,852,548 classified as current liabilities and $2,502,601 classified as noncurrent liabilities, net of $58,894 of debt issuance costs, in our condensed consolidated balance sheet related to the First BKU Term Loan and the Second BKU Term Loan. As of December 31, 2025, we had a balance of $1,813,760 classified as current liabilities and $2,976,930 classified as noncurrent liabilities, net of $71,518 of debt issuance costs, in our condensed consolidated balance sheet related to the First BKU Term Loan and the Second BKU Term Loan. As of March 31, 2026 and December 31, 2025, we had a balance of $400,000 of principal outstanding under the BKU Line of Credit.

Amortization of debt origination costs under the Bank United Credit Facility is included as a component of interest expense in the condensed consolidated statements of operations and amounted to approximately $12,624 and $7,012, respectively, for both the three months ended March 31, 2026 and 2025.

The BankUnited Credit Facility contains financial covenants tested semi-annually, on June 30^th and December 31^st , on a trailing twelve-month basis that require us to maintain a minimum debt service coverage ratio of 1.25:1.00 and a maximum funded debt/EBITDA ratio of 3.00:1.00. In addition, the BankUnited Credit Facility contains a liquidity covenant that requires us to hold a cash balance at BankUnited with a daily minimum deposit balance of $2,000,000. As of March 31, 2026, we believe we are in compliance with the debt covenants.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates its accounting policies, estimates and judgments on an on-going basis. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies are discussed in Note 2 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements.

We consider the fair value estimates, including those related to acquisitions, valuations of goodwill, intangible assets and convertible debt to be the most critical in the preparation of our consolidated financial statements as they are important to the portrayal of our financial condition and require significant or complex judgment and estimates on the part of management.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, as well as statements, other than historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. These statements are often characterized by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," "goal" or "continue" or the negative of these terms or other similar expressions.

Forward-looking statements are based on assumptions and assessments made in light of our experience and perception of historical trends, current conditions, expected and future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control. You should not place undue reliance on these forward-looking statements, which reflect our views only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update these forward-looking statements in the future, except as required by applicable law.

Risks that could cause actual results to differ materially from those indicated by the forward-looking statements include those described as "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.