v3.26.1
FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

 NOTE 15 — FAIR VALUE MEASUREMENTS

 

The Company’s non-financial assets measured at fair value on a nonrecurring basis include goodwill and intangible assets. The determination of our intangible fair values includes several assumptions and inputs (Level 3) that are subject to various risks and uncertainties. Management believes it has made reasonable estimates and judgments concerning these risks and uncertainties. All other financial assets and liabilities are carried at amortized cost.

 

The Company’s cash balances are representative of their fair values, as these balances are comprised of deposits available on demand. The carrying amounts of accounts receivable, notes receivable, other current assets, accounts payable and other current liabilities approximate their fair values because of the short turnover of these instruments.

 

Financial Disclosures about Fair Value of Financial Instruments

 

The tables below set forth information related to the Company’s consolidated financial instruments:

                    
   Level in   December 31, 2025   December 31, 2024 
   Fair Value   Carrying   Fair   Carrying   Fair 
   Hierarchy   Amount   Value   Amount   Value 
Assets:                    
Cash and cash equivalents   1   $8,756,585   $8,756,585   $8,203,842   $8,203,842 
Restricted cash   1    925,004    925,004    925,000    925,000 
                          
Liabilities:                         
Convertible notes payable   3   $7,710,000   $8,224,000   $5,100,000   $4,875,000 
Convertible note payable at fair value   3    270,000    270,000    320,000    320,000 
Convertible notes – related party   3    2,904,357    3,458,000    —    — 
Contingent consideration(1)   3    —    —    486,000    486,000 

  

(1)   On December 31, 2024, the Company calculated the final contingent consideration for the acquisition of Elle to be $486,000 and it was paid on April 14, 2025.

 

  

Convertible notes payable

 

As of December 31, 2025, the Company has thirty-one outstanding convertible notes payable with an aggregate principal amount of $7,710,000 and three outstanding convertible notes payable with a related party amounting to $2,904,357. See Note 10 for further information on the terms of these convertible notes and Note 14 for further information on terms of convertible notes with a related party.

                    
       December 31, 2025   December 31, 2024 
   Level   Carrying Amount   Fair Value   Carrying Amount   Fair Value 
                     
10% convertible notes due in May 2026   3   $500,000   $602,000   $—   $— 
10% convertible notes due in October 2026   3    300,000    291,000    800,000    793,000 
10% convertible notes due in November 2026   3    300,000    291,000    300,000    298,000 
10% convertible notes due in December 2026   3    150,000    146,000    650,000    643,000 
10% convertible notes due in January 2027   3    300,000    290,000    800,000    839,000 
10% convertible note due in April 2027   3    100,000    122,000    —    — 
10% convertible notes due in June 2027   3    150,000    143,000    150,000    148,000 
10% convertible notes due in August 2027   3    2,000,000    1,869,000    2,000,000    1,955,000 
10% convertible notes due in September 2027   3    400,000    372,000    400,000    389,000 
10% convertible notes due in January 2028   3    100,000    99,000    —    — 
10% convertible notes due in July 2028   3    100,000    112,000    —    — 
10% convertible notes due in October 2028   3    100,000    100,000    —    — 
10% convertible notes due in December 2028   3    100,000    100,000    —    — 
10% convertible note due in March 2029   3    50,000    65,000    —    — 
10% convertible note due in April 2029   3    175,000    221,000    —    — 
10% convertible note due in May 2029   3    100,000    126,000    —    — 
10% convertible note due in June 2029   3    110,000    139,000    —    — 
10% convertible note due in July 2029   3    350,000    394,000    —    — 
10% convertible notes due in February 2030   3    425,000    553,000    —    — 
10% convertible notes due in August 2030   3    1,800,000    2,075,000    —    — 
10% convertible notes due in September 2030   3    100,000    114,000    —    — 
10% convertible note with related party due in June 2027   3    1,302,795    2,007,000    —    — 
10% convertible note with related party due in October 2029   3    1,409,495    1,286,000    —    — 
10% convertible note with related party due in December 2029   3    192,067    165,000    —    — 
        $10,614,357   $11,682,000   $5,100,000   $5,065,000 

 

The convertible notes payable are categorized within Level 3 of the fair value hierarchy. The estimated fair value of the convertible notes was computed using a Monte Carlo Simulation, using the following assumptions:

        
   December 31, 
Fair Value Assumption – Convertible Debt  2025   2024 
Stock Price  $1.56   $1.07 
Minimum Conversion Price  $1.00 – 5.00   $4.00 – 5.00 
Annual Asset Volatility Estimate  $65   $65 
Risk Free Discount Rate (based on U.S. government treasury obligation with a term similar to that of the convertible note)   3.47% – 3.71%   4.23% - 4.26%

 

 

Fair Value Option (“FVO”) Election – Convertible note payable and freestanding warrants

 

Convertible note payable at fair value

 

As of December 31, 2025, the Company has one outstanding convertible note payable with a face value of $500,000, the March 4th Note, which is accounted for under the ASC 825-10-15-4 FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is presented as a single line item within other (expenses) income in the accompanying consolidated statements of operations under the caption change in fair value of convertible notes.

 

 

The March 4th Note is measured at fair value and categorized within Level 3 of the fair value hierarchy. The following is a reconciliation of the fair values from December 31, 2023 to December 31, 2025:

    
   March 4th Note 
Fair value as of December 31, 2023  $355,000 
Gain on change of fair value reported in the consolidated statements of operations   (35,000)
Fair value as of December 31, 2024   320,000 
Gain on change of fair value reported in the consolidated statements of operations   (50,000)
Fair value as of December 31, 2025  $270,000 

 

The estimated fair value of the March 4th Note as of December 31, 2025 and 2024, was computed using a Black-Scholes simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate of return, using the following assumptions: 

        
   December 31, 
   2025   2024 
Face value principal payable  $500,000   $500,000 
Original conversion price  $7.82   $7.82 
Value of common stock  $1.56   $1.07 
Expected term (years)   4.18    5.18 
Volatility   75%   90%
Risk free rate   3.66%   5.18%

 

Warrants

 

In connection with the March 4th Note, the Company issued the Series I Warrant, which was exercisable for 10,000 shares at an exercise price of $7.82 per share. The Series I Warrant was measured at fair value and categorized within Level 3 of the fair value hierarchy. The Series I Warrant expired on September 4, 2025. The fair value of the Series I Warrant was nominal as of December 31, 2024.

 

 

Contingent consideration

 

The Company records the fair value of the contingent consideration liability in the consolidated balance sheets under the caption contingent consideration and records changes to the liability against earnings or loss under the caption change in fair value of contingent consideration in the consolidated statements of operations.

 

For the contingent consideration related to Elle, the Company utilized a Monte Carlo Simulation model, which incorporates significant inputs that are not observable in the market, and thus represents a Level 3 measurement as defined in ASC 820. The unobservable inputs utilized for measuring the fair value of the contingent consideration reflect management’s own assumptions about the assumptions that market participants would use in valuing the contingent consideration as of the acquisition date.

 

For the contingent consideration, which is measured at fair value categorized within Level 3 of the fair value hierarchy, the following is a reconciliation of the fair values from December 31, 2023 to December 31, 2025:

    
   Elle(1) 
Ending fair value balance reported in the consolidated balance sheet at December 31, 2023  $— 
Contingent consideration from acquisition of Elle   436,000 
Loss on change of fair value reported in the consolidated statements of operations   50,000 
Ending fair value balance reported in the consolidated balance sheet at December 31, 2024   486,000 
Settlement of contingent consideration   (486,000)
Ending fair value balance reported in the consolidated balance sheet at December 31, 2025  $— 

 

  (1) On December 31, 2024, the Company calculated the final contingent consideration for the acquisition of Elle to be $486,000 and it was paid on April 14, 2025.