Company: FOXX
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014221
Chunk: 224

Company: Foxx Development Holdings Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 2
Chunk 224
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 Probabilities were assigned to each variable
such as the timing and pricing of events over the term of the instruments based on management projections. This led to a cash flow simulation
over the life of the instrument. A discounted cash flow was completed to determine the value for the earnout liabilities.

Prior to the Business Combination,
we were a private company and lacked company-specific historical and implied volatility information of its stock, and as such, the expected
revenue volatility was based on historical volatility of industry outlook and the expected revenue volatility and stock volatility was
based on the historical volatility of publicly traded peer companies for a term equal to the remaining expected term of the earnout period.

45

Item 3. Quantitative and Qualitative Disclosures
About Market Risk

Not applicable. 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and
with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation,
our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures
were not effective due to the identified material weaknesses described below

Based on our assessments
and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December
31, 2024 due to the material weaknesses in the design or operation of internal controls which could adversely affect our ability to record,
process, summarize, and report financial data, which includes:

-lack of sufficient segregation of duties due to limited resources;

-lack of adequate design of controls and proper documentation needed in order to demonstrate that controls
in place are operating effectively for significant transaction classes;

-inability to prepare complete and accurate financial statements in accordance with generally accepted
accounting principle (“GAAP) in a timely manner;

-inefficient oversight of those charged with governance with respect to complete and accurate finance reporting;

-lack of appropriate controls surrounding authorized signor access for bank accounts; and

-inappropriate implementation of controls over the identification of related party transactions.

Changes in Internal Control Over Financial
Reporting

There were no changes in
our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and