Dolphin Entertainment (NASDAQ:DLPN), Inc. has been notified by Nasdaq that it is not in compliance with the exchange's voting rights rule due to amendments increasing the voting power of its Series C Convertible Preferred Stock. The company has until February 28, 2025, to regain compliance.
On Monday (NASDAQ:MNDY), Dolphin Entertainment, Inc. (NASDAQ:DLPN), a Florida-based personal services company, received a notification from the Nasdaq Stock Market indicating a violation of the exchange's voting rights rule.
The issue stems from amendments made to Dolphin's articles of incorporation that modified the voting power of its Series C Convertible Preferred Stock, increasing it from three votes per share to ten votes per share through two separate amendments filed in 2022 and 2024.
In response to the violation, Dolphin Entertainment has submitted a plan to Nasdaq proposing to revert the voting rights of the Series C stock to its original three votes per share. The company intends to call a special shareholders meeting to vote on this amendment and anticipates filing the change with the Florida Secretary of State by or before February 28, 2025.
The Nasdaq letter has granted Dolphin Entertainment an extension to regain compliance with the voting rights rule by the specified date. Until then, Dolphin's securities will continue to be listed and traded on the Nasdaq Capital Market, contingent upon the company's adherence to the terms set by Nasdaq in the letter.
This development follows Dolphin Entertainment's previous disclosures regarding the amendments on September 29, 2022, and September 27, 2024, as reported in their respective Form 8-K filings.
Investors are keeping a close watch on the situation, as the company's ability to address the compliance issue could significantly impact its continued listing on the Nasdaq exchange. Dolphin Entertainment has not provided any additional comments beyond the facts stated in the SEC filing.
In other recent news, Dolphin Entertainment has been in the spotlight with several significant developments. The company reported a record-breaking second-quarter revenue of $11.4 million, a 4% increase year-over-year, which contributed to a first-half revenue of $26.6 million.
Despite an adjusted operating loss of $100,000 for the quarter, Dolphin Entertainment managed a positive adjusted operating income of $900,000 for the first half of the year.
In a strategic move, Dolphin Entertainment announced a 1-for-2 reverse stock split, reducing the company's outstanding common stock from approximately 22.2 million to about 11.1 million shares.
Maxim Group adjusted the price target for Dolphin Entertainment from $6.00 to $4.00, while maintaining a Buy rating on the stock. The company also welcomed Hilarie Bass, a renowned corporate advisor, to its Board of Directors. Dolphin Entertainment also partnered with Loti AI to protect its clients' intellectual property and likeness online.
The partnership will leverage Loti's proprietary AI tools that scan the internet for misappropriated content, offering a 95% effective takedown rate within 17 hours. This collaboration marks Dolphin's strategic entry into the AI sector, with a potential to innovate across entertainment and marketing.
InvestingPro Insights
As Dolphin Entertainment (NASDAQ:DLPN) works to address its Nasdaq compliance issue, InvestingPro data provides additional context for investors. The company's market capitalization stands at a modest $13.89 million, reflecting its small-cap status. Despite facing challenges, DLPN has shown some positive financial indicators. For instance, the company boasts an impressive gross profit margin of 93.92% for the last twelve months as of Q2 2024, suggesting efficient core operations.
However, InvestingPro Tips highlight some concerns. The company operates with a significant debt burden, which could complicate its financial flexibility as it navigates the Nasdaq compliance process. Additionally, DLPN has not been profitable over the last twelve months, with analysts not anticipating profitability this year. This financial strain is reflected in the stock's performance, as it has fallen significantly over the last year, with a one-year price total return of -62.82%.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for DLPN, providing a deeper understanding of the company's financial health and market position.
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