Dolphin Entertainment, Inc. Fair Value Disclosure
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 | $ | $ | ||||||
| Minimum Conversion Price | $ | 1.00 – 5.00 | $ | 4.00 – 5.00 | ||||
| Annual Asset Volatility Estimate | $ | $ | ||||||
| Risk Free Discount Rate (based on U.S. government treasury obligation with a term similar to that of the convertible note) | – | % | - | % | ||||
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) | ||||||||
| Volatility | % | % | ||||||
| Risk free rate | % | % | ||||||
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. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | May 26, 2022 | |
| 2020 | Apr 15, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.