Freight Technologies, Inc. Fair Value Disclosure
NOTE 9 – FAIR VALUE MEASUREMENT
Assets and liabilities recognized or disclosed at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their respective fair values.
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis for recognition or disclosure purposes as of December 31, 2023 by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability. There were no financial instruments measured at fair value as of December 31, 2024.
| As of December 31, 2023 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities: | ||||||||||||
| Convertible note | $ | $ | $ | 242,442 | ||||||||
| Total financial liabilities | $ | $ | $ | 242,442 | ||||||||
The following is a roll forward of balances for the convertible note for the year ended December 31, 2024:
| Fair value at December 31, 2023 | $ | 242,442 | ||
| Changes in fair value | (22,602 | ) | ||
| Cancellation of convertible note | (219,840 | ) | ||
| Fair value at December 31, 2024 | $ | |||
FREIGHT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The convertible note fair value was measured using a binomial lattice model utilizing observable inputs (e.g. the Company’s stock price) and unobservable inputs (e.g. the expected volatility and instrument specific borrowing rate) that cause the valuation measurements to be classified as Level 3. The following assumptions were used within the model:
| Risk-free interest rate | 3.84%-4.38% | |||
| Remaining contractual term (years) | 5-4.5 | |||
| Expected volatility | 65%-63% | |||
| Annual dividend yield | 0.00% | |||
| Fair value of common stock (per share) | $-$ | |||
| Borrowing rate | 14.5% |
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.