Item 1.01 Entry into a Material Definitive Agreement.
On December 29, 2021, Dolphin Entertainment,
Inc. (the “Company”), entered into a purchase agreement (the “Purchase Agreement”) with Lincoln
Park Capital Fund, LLC (“Lincoln Park” or “Investor”) (each, a “Party”, and together,
the “Parties”), which provides that, upon the terms and subject to the conditions and limitations set forth therein,
the Company may sell to Lincoln Park up to $25,000,000 of shares (the “Purchase Shares”) of its common stock, par value
$0.015 per share (the “Common Stock”) over the thirty-six (36) month term of the Purchase Agreement. Concurrently with
entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which
it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement (the “Registration
Rights Agreement”).
Today, we issued 51,827 shares of
Common Stock to Lincoln Park as an initial fee for its commitment to purchase shares of our Common Stock under the Purchase Agreement
(the “Initial Commitment Shares”). Upon the occurrence of certain events as set forth in the Purchase Agreement, we
will issue 37,019 additional shares of our Common Stock (the “Additional Commitment Shares”, and together with the
Initial Commitment Shares, the “Commitment Shares”, and together with the Purchase Shares, the “Shares”).
Beginning one business day following the Commencement Date (as defined below) and thereafter, the Company has the right, but not the obligation,
on any business day selected by the Company (the “Purchase Date”), provided that on such day the last closing sale
price per-share of our Common Stock is not less than $1.00 as reported by the Nasdaq Capital Market, to require Lincoln Park to purchase
up to 50,000 shares of Common Stock (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase
notice (each such purchase, a “Regular Purchase”). The Regular Purchase Amount may be increased to up to 75,000 shares
if the closing price is not below $10.00, as reported by the Nasdaq Capital Market, and up to 100,000 shares if the closing price is not
below $12.50, as reported by the Nasdaq Capital Market. Lincoln Park’s committed obligation under each Regular Purchase shall not
exceed $2,000,000, provided that the Parties may mutually agree at any time to increase the Regular Purchase Amount on any Purchase Date
at the Purchase Price, above and beyond the foregoing amounts that the Investor is committed to purchase. The purchase price for Regular
Purchases (the “Purchase Price”) shall be equal to the lesser of: (i) the lowest sale price of the common shares during
the Purchase Date, or (ii) the average of the three (3) lowest closing sale prices of the common shares during the ten (10) business days
prior to the Purchase Date. The Company shall have the right to submit a Regular Purchase notice to the Investor as often as every business
day. A Regular Purchase notice is delivered to the Investor after the market has closed (i.e. after 4:00 P.M. Eastern Time) so that the
Purchase Price is always fixed and known at the time the Company elects to sell shares to Lincoln Park.
In addition to Regular Purchases
and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln Park on
each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i)
three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on the Accelerated
Purchase Date (the “Accelerated Purchase”) at a purchase price equal to the lesser of 96% of (i) the closing sale price
on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated
Purchase Price”). The Parties may mutually agree to increase the number of common shares sold to the Investor on any Accelerated
Purchase Date at the Accelerated Purchase Price. The Company shall have the right in its sole discretion to set a minimum price threshold
for each Accelerated Purchase in the notice provided with respect to such Accelerated Purchase and the Company may direct multiple Accelerated
Purchases in a day provided that delivery of shares has been completed with respect to any prior Regular and Accelerated Purchases that
Lincoln Park has purchased.
The Company may also direct Lincoln
Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been
properly delivered to Lincoln Park in accordance with the Purchase Agreement, to make additional purchases upon the same terms as an Accelerated
Purchase, (an “Additional Accelerated Purchase”).
The purchase price of Regular Purchases,
Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted
for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during
the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the
Purchase Agreement may in no case exceed 1,592,914 shares (subject to adjustment as described above) of the Common Shares (which is equal
to approximately 19.99% of the shares of the Common Shares outstanding immediately prior to the execution of the Purchase Agreement) (the
“Exchange Cap”), unless (i) shareholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which the
Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of Common Shares to Lincoln Park under the Purchase
Agreement equals or exceeds $9.046 per share (subject to adjustment as described above) (which represents the Minimum Price, as defined
under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Purchase Agreement, such that
the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules); provided
that at no time may Lincoln Park (together with its affiliates) beneficially own more than 9.99% of the Company’s issued and outstanding
Common Shares.
The Purchase Agreement contains
customary representations, warranties, covenants, closing conditions, indemnification and termination provisions. Sales under the Purchase
Agreement may commence only after certain conditions have been satisfied (the date on which all requisite conditions have been satisfied,
the “Commencement Date”), which conditions include the delivery to Lincoln Park of a prospectus supplement covering
the shares of Common Shares issued or sold by the Company to Lincoln Park under the Purchase Agreement, the filing with the Nasdaq Stock
Market of a Listing of Additional Shares notification with respect to the Shares and Nasdaq having raised no objection to the consummation
of transactions contemplated under the Purchase Agreement, and the receipt by Lincoln Park of a customary opinion of counsel and other
certificates and closing documents.
The Purchase Agreement may be terminated
by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to
terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect
short selling or hedging of the Common Shares. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the
fees it incurred in connection with the Purchase Agreement, the Company did not pay any additional amounts to reimburse or otherwise compensate
Lincoln Park in connection with the transaction, other than the issuance of the Commitment Shares.
There are no limitations on the
use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Company’s ability
to enter into a similar type of agreement during the Term, excluding an At-The-Market transaction with a registered broker-dealer), rights
of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Company may deliver Purchase Notices
under the Purchase Agreement, subject to market conditions, and in light of its capital needs, from time to time and under the limitations
contained in the Purchase Agreement. Any proceeds that the Company receives under the Purchase Agreement are expected to be used for working
capital and general corporate purposes.
The issuance of the Purchase Shares
and Commitment Shares have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.
333-259132) (the “Registration Statement”), and the related base prospectus included in the Registration Statement,
as supplemented by a prospectus supplement to be filed on or around the Commencement Date (the “Prospectus Supplement”).
The foregoing is a summary description
of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its nature, is incomplete. Copies of the Purchase
Agreement and the Registration Rights Agreement are filed as Exhibits 10.1 and 10.2 attached hereto. The foregoing descriptions of the
Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to such exhibits. The Purchase Agreement
and Registration Rights Agreement contain customary representations and warranties, covenants and indemnification provisions that the
parties made to, and solely for the benefit of, each other in the context of all of the terms and conditions of such agreements and in
the context of the specific relationship between the parties thereto. The provisions of the Purchase Agreement and the Registration Rights
Agreement, including any representations and warranties contained therein, are not for the benefit of any party other than the parties
thereto and are not intended as documents for investors and the public to obtain factual information about the current state of affairs
of the parties thereto. Rather, investors and the public should look to other disclosures contained in the Company’s annual, quarterly
and current reports it may file with the Securities and Exchange Commission (the “SEC”).
The information contained in this
Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy the shares of the Company’s
Common Shares discussed herein, nor shall there be any offer, solicitation or sale of the shares in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.