Company: FOXX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043597
Chunk: 152

Company: Foxx Development Holdings Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 8
Chunk 152
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observable (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 nine months ended March 31, 2025.

24

The following table presents
the observable and unobservable inputs of the earnout liability for earnout shares based on revenue targets as of March 31, 2025:

    March 31, 
2025

    September 26,
2024

    Inputs
     
    Input Method
     
    Input Value

    Input Value

    Simulated forecast of base monthly revenue
     
    Unobservable
     
    $
    5.5 million

    $
    7.4 million

    Industry revenue growth
     
    Unobservable

    1.7
    %

    1.7
    %
  
    Revenue volatility
     
    Unobservable

    42.1
    %

    30.5
    %
  
    Stock volatility
     
    Unobservable

    77.3
    %

    103.2
    %
  
    Stock price
     
    Observable
     
    $
    4.14

    $
    11.20

    Risk-free rate
     
    Observable

    4.32
    %