Foxx Development Holdings Inc. Fair Value Disclosure

Note 17 — Fair value measurement

 

The Company did not have any assets or liabilities measured at fair value on a recurring basis as of June 30, 2024. The following table provides information related to the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2025 and September 26, 2024 (issuance date): 

 

June 30, 2025

Carrying Value

Quoted Prices in Active Markets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Other Unobservable Inputs (Level 3)

Liabilities:

Earnout liabilities

$

-

$

-

$

-

$

-

Total

$

-

$

-

$

-

$

-

 

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 September 26, 2024 (issuance date):

 

					September 26, 2024
Inputs		Input Method			Input Value
Simulated forecast of base monthly revenue		Unobservable			$	7.4 million
Industry revenue growth		Unobservable				1.7	%
Revenue volatility		Unobservable				30.5	%
Stock volatility		Unobservable				103.2	%
Stock price		Observable			$	11.20
Risk-free rate		Observable				4.16	%
Term		Observable				0.76 Years

 

					June 30, 2025
Inputs		Input Method			Input Value
Actual revenue		Unobservable			$	5.5 million
Term		Observable				0.00 Years

The following table summarizes the activity for the Company’s Level 3 instruments measured at fair value on a recurring basis:

 

		Earnout Liabilities
Balance as of June 30, 2024		$	-
Issuances – September 26, 2024			5,688,007
Change in fair value			(5,688,007	)
Balance as of June 30, 2025		$	-