Company: QTIWW
Filing Date: 2025-05-13
Form Type: 10-Q
Source: 0001844505-25-000053
Chunk: 40

Company: QT IMAGING HOLDINGS, INC.
Filing Date: 2025-05-13
Form: 10-Q
Item: Part I, Item 1
Chunk 40
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 of the Yorkville Warrant during the three months ended March 31, 2025 was as follows:Yorkville WarrantBeginning balance, January 1, 2025$— Fair value at issuance2,992,522Change in fair value111,795 Ending balance, March 31, 2025$3,104,317 Earnout LiabilityThe fair value of the Merger Consideration Earnout shares was calculated using a Monte Carlo simulation. The simulation used as significant inputs the Company's management’s current assessment of placements of breast scanning systems in 2024 and 2025, likely expected values for revenues from 2024 through 2026, probabilities for regulatory approvals including FDA clearances, and probabilities of other triggering events related to the open angle scanner. The probabilities of the non-revenue triggers generally range from 0 to 25 percent. The revenue forecast for the respective measurement periods are generally in line with the revenue triggers as defined in the Business Combination Agreement, as amended. Additional significant inputs into the simulation include the volatility of Company's equity, assets, and revenue that was derived in a manner as would be common for such simulation, and published industry operating profitability metrics. A weighted average cost of capital (“WACC”) was estimated based on a venture capital rates of return on debt and equity. This WACC was used as the discount rate applicable to revenue, after applying a delivering factor to convert it from being applicable to earnings before interest and tax (“EBIT”) to being applicable to revenue. This EBIT to revenue delivering factor was estimated using published industry operating profit and cost metrics.The Monte Carlo simulation developed a distribution of projected revenues for 2024 through 2026 using a Geometric Brownian Motion framework based on a standard normal distribution of returns. The simulation also developed a distribution of potential daily common stock prices for 2026 using a Geometric Brownian Motion framework. The resulting fair value is based on the average of the number of shares that will be paid out for each triggering event over a statistically significant number of simulations.Significant assumptions used in the valuation of the fair value of the earnout liability as of March 31, 2025 and December 31, 2024 were as follows:March 31, 2025December 31, 2024Fair value of common stock$0.60 $0.49 Volatility of revenue24.0 %23.0 %Discount rate applicable to revenue7.0 %7.0 %Risk