Company: FOXX
Filing Date: 2025-10-15
Form Type: 10-K
Source: 0001213900-25-098953
Chunk: 638

Company: Foxx Development Holdings Inc.
Filing Date: 2025-10-15
Form: 10-K
Item: Item 2
Chunk 638
---
          -

    $
         -

    September
    26, 2024 (issuance date)
     
    Carrying
    Value

    Quoted
    Prices in
    Active
    Markets
    (Level 1)

    Significant
    Other
    Observable
    Inputs 
    (Level 2)

    Significant
    
    Other
    Unobservable
    Inputs 
    (Level 3)

    Liabilities:

    Earnout liabilities
     
    $
    5,688,007

    $
                   -

    $
                   -

    $
    5,688,007

    Total
     
    $
    5,688,007

    $
    -

    $
    -

    $
    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 30, 2025. Any changes to stock price and forecasted revenues through June 30, 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
following table presents the observable and unobservable inputs of the earnout liability for earnout shares based on revenue targets
as of