Company: FOXX
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014221
Chunk: 132

Company: Foxx Development Holdings Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 132
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688,007  
    $-  
    $-  
    $5,688,007 

The earnouts based on revenue
have been classified within Level 3 of the hierarchy as the fair value is derived using a Monte Carlo simulation analysis in a risk neutral
framework, which uses a combination of observable (Level 2) and unobservable (Level 3) inputs. Key estimates and assumptions impacting
the fair value measurement include the Company’s revenue forecasts as well as the assumptions listed in tables below. The fair value
measurement associated with the earnout liability is highly sensitive to changes in stock price and forecasted amounts for revenue through
June 2025. Any changes to stock price and forecasted revenues through June 2025 will result in remeasurement of the earnout liability
and could result in material gains or losses being recognized in the statement of operations.

The Company estimated the
fair value per share of the underlying common stock based, in part, on the results of third-party valuations and additional factors deemed
relevant. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal
to the remaining contractual term of the earnouts.

Prior to the Business Combination,
the Company was 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. The input for the based monthly revenue were based on actual revenue for the six months ended December 31, 2024.

The following table presents
the observable and unobservable inputs of the earnout liability for earnout shares based on revenue targets as of December 31, 2024:

    December 31,  2024  
    September 26, 2024 

    Inputs 
    Input Method 
    Input Value  
    Input Value 

    Simulated forecast of base monthly revenue 
    Unobservable 
    $6.6 million  
    $7.4 million 

    Industry revenue growth 
    Unobservable 
     1.7% 
     1.7%

    Revenue volatility 
    Unobservable 
     53.9% 
     30.5%

    Stock volatility 
    Unobservable 
     104.7% 
     103