FOXX 10-Q
Foxx Development Holdings Inc. (FOXX)
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended:
OR
For the transition period from _______to _______
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| The | ||||
| The |
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
State the number of shares outstanding of each of the issuer’s
classes of common equity as of the latest practicable date. As of February 13, 2026, there are
FOXX DEVELOPMENT HOLDINGS INC.
CONTENTS
i
PART I: FINANCIAL INFORMATION
Item 1. - Financial Statements
FOXX DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | June 30, | |||||||
| 2025 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and other receivables, net of allowance for credit losses of $ | ||||||||
| Prepaid expenses - related party | ||||||||
| Amount due from related parties | ||||||||
| Total Current Assets | ||||||||
| PROPERTY AND EQUIPMENT, NET | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Operating right-of-use assets | ||||||||
| Security deposits | ||||||||
| Total Non-current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Other payables and accrued liabilities | ||||||||
| Other payable - related parties | ||||||||
| Contract liabilities | ||||||||
| Income taxes payable | ||||||||
| Current maturity of long-term loan | ||||||||
| Operating lease liabilities - current | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Operating lease liabilities - non-current | ||||||||
| Long-term loan - non-current | ||||||||
| Total Non-current Liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (See Note 18) | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
FOXX DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| REVENUES, NET | $ | $ | $ | $ | ||||||||||||
| COST OF GOODS SOLD | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research and development - related party | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER (EXPENSE) INCOME | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income, net | ( | ) | ( | ) | ||||||||||||
| Change in fair value of earnout liabilities | ||||||||||||||||
| Total Other (Expense) Income, net | ( | ) | ( | ) | ||||||||||||
| (LOSS) INCOME BFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ||||||||||
| PROVISION FOR INCOME TAXES | ||||||||||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ( | ) | ||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE (LOSS) INCOME | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||||||
| Basic | * | |||||||||||||||
| Diluted | * | |||||||||||||||
| (LOSS) INCOME PER SHARE | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
FOXX DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY (DEFICIT)
| For the Six Months Ended December 31, 2025 | ||||||||||||||||||||||||
| Additional | Accumulated other | |||||||||||||||||||||||
| Common stock | paid-in | Accumulated | comprehensive | |||||||||||||||||||||
| Shares | Amount | capital | deficit | loss | Total | |||||||||||||||||||
| BALANCE, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE, September 30, 2025 (Unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Issuance of common stock under EIP | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE, December 31, 2025 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| For the Six Months Ended December 31, 2024 | ||||||||||||||||||||||||
| Additional | Accumulated other | |||||||||||||||||||||||
| Common stock | paid-in | Accumulated | comprehensive | |||||||||||||||||||||
| Shares* | Amount | capital | deficit | loss | Total | |||||||||||||||||||
| BALANCE, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Conversion of convertible promissory notes into common stock upon completion of reverse recapitalization | ||||||||||||||||||||||||
| Issuance of common stock upon completion of reverse recapitalization | ( | ) | ( | ) | ||||||||||||||||||||
| Earnout liabilities | - | ( | ) | ( | ) | |||||||||||||||||||
| Transaction costs | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE, September 30, 2024 (Unaudited) | ( | ) | ||||||||||||||||||||||
| Issuance of common stock through exercise of warrants | ||||||||||||||||||||||||
| Stock-based compensation expenses | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| BALANCE, December 31, 2024 (Unaudited) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
FOXX DEVELOPMENT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Interest expense from convertible promissory notes | ||||||||
| Amortization of operating right of use assets | ||||||||
| Provision of credit losses, net | ||||||||
| Stock-based compensation expenses | ||||||||
| Change in fair value of earnout liabilities | ( | ) | ||||||
| Gain on disposal of equipment | ( | ) | ||||||
| Impairments of inventories | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Contract assets | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Amount due from related parties | ( | ) | ||||||
| Security deposits | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Contract liabilities | ||||||||
| Income taxes payable | ( | ) | ( | ) | ||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Other payable - related parties | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Proceeds from disposal of equipment | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayments to short-term loans | ( | ) | ||||||
| Principal payments of long-term loan | ( | ) | ( | ) | ||||
| Proceeds from convertible promissory note | ||||||||
| Proceeds from reverse recapitalization, net of payments of transaction costs | ||||||||
| Proceeds from issuance of common stock through exercise of warrants | ||||||||
| Payment of redemption payable | ( | ) | ||||||
| Payments of deferred transaction costs | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGES | ( | ) | ||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| CASH, beginning of the period | ||||||||
| CASH, end of the period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Initial recognition of operating right-of-use assets and lease liabilities | $ | $ | ||||||
| Modification of operating right-of-use assets and lease liabilities | $ | $ | ||||||
| Conversion of convertible promissory notes into common stock | $ | $ | ||||||
| Reverse recapitalization transaction costs net against additional-paid in capital | $ | $ | ||||||
| Deferred transaction costs included in other payables and accrued liabilities | $ | $ | ||||||
| Initial recognition of earnout liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
FOXX DEVELOPMENT HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Nature of business and organization
Foxx Development Holdings
Inc. (“Foxx” or the “Company”) was incorporated on
Following the consummation of the Business Combination (the “Closing”) on September 26, 2024, the Company was renamed as “Foxx Development Holdings Inc.” and became a publicly traded company. The Merger Sub was renamed as “Foxx Development Inc.” and became the Delaware subsidiary of the Company.
On August 29, 2023,
Foxx Technology Pte Ltd, a Singapore private company (“Foxx Technology”), was incorporated in Singapore, with Old Foxx holding
On March 3, 2025, Foxx Development (Singapore) Pte. Ltd (“Foxx
Singapore”) was incorporated in Singapore. Foxx Singapore primarily engaged in assembling electronic products, and was
On April 8, 2025, Foxx Technologies
Inc (“Foxx Tech”) was incorporated in the State of California. Foxx Tech is
On May 19, 2025, Nexus IQ Technology Inc (“Nexus IQ”) was
incorporated in the State of Delaware. Nexus IQ primarily engaged in developing, sales and rental of products involving Artificial Intelligence
of Things (“AIoT”) technologies and was
Note 2 — Going Concern
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyses its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses, and capital expenditure obligations.
The Company primarily engages in the sales of electronic products.
Debt financing in the form of convertible notes, loans from bank, third parties, and related parties, and cash generated from operations
have been utilized to finance the working capital. The Company’s management has considered whether there is substantial doubt about
its ability to continue as a going concern due to (1) net cash used in operating activities of approximately $
5
If the Company is unable to generate sufficient funds to finance its working capital requirements within the normal operating cycle of a twelve-month period from the date of the unaudited condensed consolidated financial statements are issued, the Company may have to consider supplementing its available sources of funds through the following sources:
| ● | Other sources of available financing from banks in the United States of America and other financial institutions or private lenders; |
| ● | Financial support and credit guarantee commitments from the Company’s related parties; and |
| ● | Equity financing. |
The Company can make no assurance that required financing will be available in the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or more of these events do not occur, or if subsequent capital raises are insufficient to bridge any financial and liquidity shortfall, there would likely be a material adverse effect on the Company and it would materially adversely affect its ability to continue as a going concern.
As such, the Company’s management has determined that the factors discussed above have raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.
Note 3 — Basis of presentation and significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position and operation results have been included. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (the “10-Q”) should be read in conjunction with information in the Annual Report for the fiscal year ended June 30, 2025, on Form 10-K filed by the Company with the SEC on October 15, 2025.
Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one-half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the Board of Directors, or to cast a majority of votes at the meetings of directors.
Use of estimates and assumptions
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates.
6
Foreign currency translation and transactions
The reporting currency of the Company is the U.S. dollar. The functional currency for the holding company is the U.S. dollar (“USD”). In Singapore, the Company conducts its business in the local currency, Singapore dollar (“SGD”), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the Federal Reserve System at the end of the period. The statements of operations and cash flows are translated at the average translation rates during the reporting periods, and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive loss. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Translation adjustments are included in accumulated other comprehensive
loss. The balance sheet amounts, with the exception of stockholders’ deficit at December 31, 2025, were translated at
SGD
Segments
The Company uses the management
approach in determining reportable operating segments. The management approach considers the internal reporting used by the chief operating
decision maker (“CODM”), which is the Company’s and his direct reports, for making operating
decisions about the allocation of resources and the assessment of performance in determining the Company’s reportable operating
segments. The Company’s CODM reviews financial information presented on a consolidated basis, accompanied by disaggregated information
about revenues, cost of revenues, and gross profit by business lines (electronic products revenues and App Service (as defined below)
commission revenue) for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held
accountable for operations, operating results and plans for levels or components below the consolidated unit level. In addition, all of
the Company’s revenues are derived solely from the U.S. Accordingly, no geographical information is presented. Management has determined
that the Company has
Accounts receivable
Accounts receivables are
recognized and carried at the original invoiced amount less an allowance for any uncollectible accounts or credit losses. An allowance
for credit losses for accounts receivables is established based on various factors, including historical payments and current economic
trends. The Company reviews its allowance for credit loss by assessing individual accounts receivable over a specific aging and amount.
All other balances are pooled based on historical collection experience. The estimate of expected credit losses is based on information
about past events, current economic conditions, and forecasts of future economic conditions that affect collectability. Accounts receivable
are written off on a case-by-case basis after exhaustive efforts at collection are made, net of any amounts that may be collected. As
of December 31, 2025 and June 30, 2025, $
Inventories
Inventories are stated at the lower cost or net realizable value. The
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Cost is determined using the “First in, First out” method. Inventories mainly include electronic products and accessories,
which are purchased from the Company’s suppliers as merchandized goods and freight-in. At least a quarterly basis, inventories are
reviewed for potential write-downs for estimated obsolescence or unmarketable inventories which equals the difference between the costs
of inventories and the estimated net realizable value. The estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal and transportation. When inventories
are written down to net realizable value, they are not marked up subsequently based on changes in underlying facts and circumstances.
As of December 31, 2025 and June 30, 2025, the Company had inventories of $
7
Contract assets
Contract assets consisted
of cash deposited or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any advances
to suppliers determined by management that such advances will not be in receipts of inventories or refundable, the Company will recognize
an allowance account to reserve such balances. Management reviews its advances to suppliers on a regular basis to determine if the allowance
is adequate and adjusts the allowance when necessary. Delinquent account balances are written off against allowance for credit losses
after management has determined that the likelihood of collection is not probable. The Company’s management continues to evaluate
the reasonableness of the valuation allowance policy and update it if necessary. As of December 31, 2025 and June 30, 2025,
Contract liabilities
Contract liabilities mainly consist of deposits received from customers before all the relevant criteria for revenue recognition are met and are recorded as customer deposits.
Earnout liabilities
At the Closing of the Business
Combination, pursuant to the Business Combination Agreement, the stockholders of Old Foxx were entitled to receive up to a total of
Convertible instrument
The Company accounts for its convertible instrument in accordance with the Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification (“ASC”) No. 470-20 “Debt with Conversion and Other Options ”, whereby the convertible instrument is initially accounted for as a single unit of account, unless it contains a derivative that must be bifurcated from the host contract in accordance with ASC 815-15 Derivatives and Hedging — Embedded Derivatives or the substantial premium model in ASC 470-20 Debt applies. If the equity securities underlying the embedded conversion option are readily convertible to cash, such as publicly traded common shares, the embedded conversion option is likely to meet the net settlement criterion to be considered a derivative. If the equity securities underlying the conversion option are not readily convertible to cash, the embedded conversion option may not meet the net settlement criterion and therefore would not meet the definition of a derivative. Because the convertible instrument has a fixed conversion price and therefore, it lacks an underlying and does not meet the requirement of a derivative. As a result, the Company determined its embedded conversion option does not meet the definition of a derivative for bifurcation. All the convertible notes were converted into the Company’s Common Stock on September 26, 2024 as part of the business combination.
Revenue recognition
The Company recognizes revenue to depict the transfer of promised goods or services (that is, an asset) to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services. An asset is transferred when the customer obtains control of that asset. It also requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.
8
To achieve that core principle, the Company applies the five steps defined under ASC 606, Revenue from Contracts with Customers: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company’s main business is selling electronic products to 1) wholesale customers and 2) individual E-commerce customers, and the Company’s revenue also came from 3) the App Service commission from providing installation of applications on the Company’s mobile devices and revenue share from clicks and impressions.
Wholesale Customers
The Company recognizes a contract with a customer when the contract is committed in writing, the rights of parties, including payment terms, are identified, the contract has commercial substance, and collectability is probable.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting in ASC 606. A contract’s transaction price is allocated to each performance obligation identified in the arrangement based on the relative standalone selling price of each distinct good or service in the contract and recognized as revenue when, or as, the performance obligation is satisfied. For all the Company’s wholesale contracts, the Company has identified one performance obligation, which is primarily satisfied at a point in time upon delivery of products based on terms stated in the contracts, either on Free on Board (“FOB”) shipping point or destination, depending on the specified contract. The Company’s customers generally either pay for the order in full balance prior to shipment or in partial payments with credit terms of 30 to 90 days after shipment depending on the specified contract. No sales returns are being given to its wholesale customers as they were being given additional 1-3% of products on top of each customer’s order (see Note 3 - “Warranty” below). There is no transaction prices allocated to future periods or future obligations and no revenue was recognized for performance obligations satisfied in previous periods.
Warranty
The Company generally provides
E-commerce Customers
The Company recognizes a contract with a customer when the contract is committed in writing and signed electronically on an e-commerce platform, the rights of parties, including payment terms, are identified, the contract has commercial substance, and collectability is probable.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting in ASC 606. For all the Company’s contracts, the Company has identified one performance obligation, which is primarily satisfied at a point in time upon delivery of products based on terms stated in the contracts on shipping destination at its individual customer shipping address, which is the Company’s obligation to deliver the product to the end user/individual customer, depending on the specified contract. The Company’s e-commerce customers pay the order in full balance prior to shipment to the e-commerce platform and the e-commerce platform withholds the payment for 30 days before remitting payments to the Company. The Company offered one month of free exchange or return. As a result, the Company recognized its revenues from the e-commerce customers, in the third-party e-commerce platform, net of estimated sales returns, discount, and rebate, as a consideration reducing the transaction price. Historically, sales returns were insignificant to the Company’s operations. For the three and six months ended December 31, 2025 and 2024, the Company did not recognize any estimated sales returns. There is no transaction prices allocated to future periods or future obligations and no revenue was recognized for performance obligations satisfied in previous periods.
9
App Service Commission Revenue
The Company provides an App Service (as defined below) by installing applications from App (as defined below) developer partners (the “Partners”) onto its mobile devices and facilitating the distribution of these devices to end users (the “App Service”). The App Service commission revenue is generated when end users interact with Partner-developed mobile applications (“App” or “Apps”) installed on the Company’s mobile devices, such as through clicks and/or impressions, App activations, and/or additional App installations, triggering the Partners’ obligation to pay the Company its App revenue share (service commission). The revenue shares are considered variable consideration. Those revenue shares related to clicks, impressions, and additional App installations are determined based on the contract price negotiated between the Partners and the third-party advertisers, while those related to App activations are determined based on the number of App activations. The Partners are primarily responsible in developing and maintaining the App, and are the primary obligor to users of the application and determine and control the revenue shares (service commission) to pay the Company. No refund or return policy is provided to the Partners. The Company recognizes App Service commission revenue at a point in time when the activations and service commission is earned, which is when the app activations, clicks/impressions, or additional app installations occur, and when the uncertainty of the variable consideration is resolved.
Practical expedient
The Company applies the practical expedient in ASC 606 to expense as incurred, the costs to obtain a contract with a customer when the amortization period is one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets for the three and six months ended December 31, 2025 and 2024.
Interest expenses
Interest expenses consist
primarily of interest incurred on convertible notes, unpaid purchase balance from a vendor (see Note 10), and borrowings and others. For
the three months ended December 31, 2025 and 2024, the Company had interest expenses that amounted to $
Lease
The Company accounts for leases in accordance with ASC 842, Leases. The Company categorizes leases with contractual terms longer than 12 months as either operating or finance. Finance leases are generally those leases that substantially utilize or pay for the entire asset over their estimated life. All other leases are categorized as operating leases. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. As of December 31, 2025 and June 30, 2025, the Company does not have finance leases.
The Company determines if an arrangement is, or contains, a lease at inception. Operating lease assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and operating lease liabilities represent its obligation to make lease payments arising from the aforementioned right.
10
Operating lease right-of-use (“ROU”) assets and liabilities are initially recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the implicit rate for each of the Company’s leases is not readily determinable, the Company uses incremental borrowing rate as effective interest rate, based on the information available at the lease commencement date in determining the present value of its expected lease payments. Operating lease assets also include any initial direct costs and any lease payments made prior to the lease commencement date and are reduced by any lease incentives received. According to ASC 842-10-15-37, a lessee may, as an accounting policy election by class of underlying asset, choose not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. The Company has identified the common area maintenance (“CAM”) fee as a non-lease component and elected to not separate it from the lease component.
Operating lease assets are amortized on a straight-line basis in operating lease expense over the lease term on the consolidated statements of operations. The related amortization of ROU assets along with the change in the operating lease liabilities are separately presented within the cash flows from operating activities on the consolidated statements of cash flows. The Company records lease expenses for operating leases on a straight-line basis over the lease term.
The Company reviews the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets on an annual basis. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease right-of-use assets in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the three and six months ended December 31, 2025 and 2024, the Company did not recognize impairment loss against its right-of-use assets.
For a lease with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liability. For the lease that with lease term of one year or shorter, the Company has elected to not recognize right-of-use asset and lease liability.
Stock-based compensation
The measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors, including employee stock options and restricted stock, is based on estimated fair value of the awards on the date of grant, of which stock options uses the Black-Scholes option pricing model, inclusive of assumptions for risk-free interest rates, expected dividends, expected terms, expected volatility, and the fair value of the underlying stock, and restricted stock is based on the market value of the Company’s common stock. The value of awards that are ultimately expected to vest is recognized as expense on a straight-line basis over the vesting service periods in the consolidated statements of operations. Forfeitures are accounted for as they occur.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. The Company determined that upon further review of the warrant agreement, the Company concluded that its warrants qualify for equity accounting treatment.
11
Upon completion of the Business Combination, all of ACAC’s outstanding public and private warrants (See Note 15) were replaced by the Company’s public and private warrants. The Company treated such warrants replacement as a warrant modification and no incremental fair value was recognized for the three and six months ended December 31, 2025 and 2024.
Basic and diluted loss per share
Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period.
Diluted net loss per share attributable to common stockholders adjusts basic loss per share for the potentially dilutive impact of non-participating shares of common stock. Dilutive equivalent shares are excluded from the computation of diluted loss per share if their effects would be anti-dilutive. Common stock issuable upon the conversion of the warrants and the vesting of RSUs (defined in Note 15) are using the treasury stock method. Common stock issuable in connection with the Company’s convertible promissory notes are using the if-converted method.
Recently adopted accounting standards
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
The Company does not believe any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s balance sheets, statements of operations and comprehensive loss, and statements of cash flows.
Recently issued accounting pronouncements not yet adopted
In December 2023, FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual consolidated financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact these standards will have on its financial statements.
In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact these standards will have on its financial statements.
In July 2025, FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Subtopic 326) (“ASU 2025-05”), to simply the Current Expected Credit Loss (CECL) model for accounts receivable and contract assets by offering a practical expedient to use current conditions for forecasts and an accounting policy election to consider post-balance sheet collections, allowing for early adoption for financial statements not yet issued. The guidance is effective for annual reporting periods beginning after December 15, 2025, but early adoption is permitted. The Company is currently evaluating the impact these standards will have on its financial statements.
12
Note 4 — Reverse recapitalization
Upon the consummation of the Business Combination, the following transactions were completed, based on the Company’s capitalization as of September 26, 2024 (the “Closing Date”):
| (i) | All
|
| (ii) |
| (iii) | All
issued and outstanding shares of Old Foxx Common Stock were cancelled in exchange for the rights for Old Foxx Shareholders, including
the holders of Old Foxx’s convertible promissory notes upon the conversion of the convertible promissory notes and their interests
into Old Foxx Common Stock immediately prior to Closing (see Note 13), to receive such stockholder’s pro rata share of |
| (iv) |
in connection with the financial performance for the fiscal year ended June 30, 2024:
| ● |
| ● |
| ● |
in connection with the financial performance for the fiscal year ended June 30, 2025:
| ● |
| ● |
13
| ● |
The Earnout Shares in connection with the financial performance for the fiscal years ended June 30, 2025 and 2024 were forfeited since the Company did not meet the financial performance threshold.
| (v) | All
issued and outstanding |
The following table presents the number of the Company’s common stock issued and outstanding immediately following the Reverse Recapitalization (as defined below):
| Common | ||||
| Stock | ||||
| ACAC’s common stock outstanding prior to Reverse Recapitalization | ||||
| Less: redemption of ACAC’s common stock | ( | ) | ||
| Common stock issued to underwriter | ||||
| Conversion of Old Foxx’s common stock into Foxx’s common stock | ||||
| Conversion of Old Foxx’s convertible promissory notes into Foxx’s common stock | ||||
| Total common stock | ||||
Old Foxx was determined to be the accounting acquirer given Old Foxx effectively controlled the combined entity after the Business Combination. The transaction is accounted for as a reverse recapitalization (“Reverse Recapitalization”), which is equivalent to the issuance of common stock by Old Foxx for the net monetary assets of ACAC, accompanied by a recapitalization. Old Foxx is determined as the accounting acquirer and the historical financial statements of Old Foxx became the Company’s historical financial statements, with retrospective adjustments to give effect of the Reverse Recapitalization. The net assets of ACAC were recognized as of Closing date at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Old Foxx and Old Foxx’s operations are the only ongoing operations of the Company.
In connection with the Reverse
Recapitalization, the Company raised approximately $
The following table reconciles the elements of the Reverse Recapitalization to the consolidated statements of cash flows and the changes in stockholders’ deficit:
| September 26, | ||||
| 2024 | ||||
| Funds held in ACAC’s trust account | $ | |||
| Funds held in ACAC’s operating cash account | ||||
| Less: payments of transaction costs incurred by ACAC | ( | ) | ||
| Proceeds from the Reverse Recapitalization | ||||
| Less: non-cash net deficit assumed from ACAC | ( | ) | ||
| Net distributions from issuance of Common Stock upon the Reverse Recapitalization | $ | ( | ) | |
The shares and corresponding
capital amounts and all per share data related to Old Foxx’s outstanding common stock prior to the Reverse Recapitalization have
been retroactively adjusted using the Exchange Ratio of
14
Note 5 — Accounts receivable, net
As of December 31, 2025 and June 30, 2025, accounts receivable consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
For the three months ended December 31, 2025 and 2024, the Company
recognized $
Movement of allowance for credit losses consisted of the following for the periods ended indicated:
| For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance as of the beginning of the period | $ | $ | ||||||
Addition | ||||||||
| Recovery | ( | ) | ||||||
| Balance as of the end of the period | $ | $ | ||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance as of the beginning of the period | $ | $ | ||||||
Addition | ||||||||
| (Recovery | ( | ) | ||||||
| Balance as of the end of the period | $ | $ | ||||||
Note 6 — Inventories
As of December 31, 2025 and June 30, 2025, inventories consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| Finished goods | $ | $ | ||||||
| Total inventories | $ | $ | ||||||
15
For the three months ended December 31, 2025 and 2024, the impairment
for inventories amounted to $
Note 7 — Contract assets
The following table presents the Company’s contract assets balances and changes therein:
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Balance as of the beginning of the period | $ | $ | $ | $ | ||||||||||||
| Add: net increase in current period contract asset | ||||||||||||||||
| Less: inventory received from beginning contract asset | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total contract assets as the end of the period | $ | $ | $ | $ | ||||||||||||
Note 8 — Prepaid expenses and other current assets
As of December 31, 2025 and June 30, 2025, prepaid expenses and other current assets consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| Other receivables(1) | $ | $ | ||||||
| Prepaid rent | ||||||||
| Prepaid research and development fees | ||||||||
| Prepaid insurance and subscriptions | ||||||||
| Prepaid professional fee | ||||||||
| Prepayment to be refunded(2) | ||||||||
| Advances to a third party | ||||||||
| Other prepaid expenses | ||||||||
| Less: allowance for credit losses (1) (2) | ( | ) | ( | ) | ||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| (1) |
| (2) |
For the three months ended December 31, 2025 and 2024, the Company
recognized $
16
Movement of allowance for credit losses consisted of the following for the period ended the date indicated:
| For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance as of the beginning of the period | $ | $ | ||||||
| Addition | ||||||||
| Balance as of the end of the period | $ | $ | ||||||
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance as of the beginning of the period | $ | $ | ||||||
| Addition | ||||||||
| Balance as of the end of the period | $ | $ | ||||||
Note 9 — Property and equipment, net
As of December 31, 2025 and June 30, 2025, property and equipment, net consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| Computer and office equipment | $ | $ | ||||||
| Equipment | ||||||||
| Furniture and fixtures | ||||||||
| Vehicles | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense for
the three months ended December 31, 2025 and 2024 amounted to $
Note 10 — Other payables and accrued liabilities
As of December 31, 2025 and June 30, 2025, other payables and accrued liabilities consist of the following:
| December 31, 2025 | June 30, 2025 | |||||||
| (Unaudited) | ||||||||
| Payroll and payable tax payable | $ | $ | ||||||
| Interest payable* | ||||||||
| Professional fee payable | ||||||||
| Accrued warranty expenses | ||||||||
| Excise tax payable** | ||||||||
| Others | ||||||||
| Total other payables and accrued liabilities | $ | $ | ||||||
| * |
| ** |
17
Note 11 — Contract liabilities
Contract liabilities consist of customer deposits, which are recorded on the consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.
The following table presents the Company’s contract liabilities balances and changes therein:
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Balance, beginning of the period | $ | $ | $ | $ | ||||||||||||
| Add: net increase in current period contract liabilities | ||||||||||||||||
| Less: revenue recognized from beginning contract liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total contract liabilities | $ | $ | $ | $ | ||||||||||||
Note 12 — Related party balances and transactions
Related party balances
Prepaid expenses to a related party
| Name of Related Party | Relationship | Nature | December 31, 2025 | June 30, 2025 | ||||||||
| (Unaudited) | ||||||||||||
| Azure Horizon LLC (“Azure”) | $ | $ | ||||||||||
Amount due from related parties
Amount due from related parties consists of the following:
| Name of Related Party | Relationship | Nature | December 31, 2025 | June 30, 2025 | ||||||||
| (Unaudited) | ||||||||||||
| Gregory J Foley (1) | $ | $ | ||||||||||
| “Joy” Yi Hua (1) | ||||||||||||
| James Liao (1) | ||||||||||||
| Junzi Yuan (1) | ||||||||||||
| Haitao Cui | ||||||||||||
| Luying Mei | ||||||||||||
| Acri Capital Sponsor LLC(2) | ||||||||||||
| Total | $ | $ | ||||||||||
| (1) |
| (2) |
18
Other payable — related party
Other payable — related parties consists of the following:
| Name of Related Party | Relationship | Nature | December 31, 2025 | June 30, 2025 | ||||||||
| (Unaudited) | ||||||||||||
| Wuhan Haoxun Communication Technology Co. Ltd (“Wuhan Haoxun”)(1) | $ | $ | ||||||||||
| Acri Capital Sponsor LLC | ||||||||||||
| Swiftfulfill Warehouse LLC (“Swiftfulfill”) (2) | ||||||||||||
| “Joy” Yi Hua | ||||||||||||
| Total | $ | $ | ||||||||||
| (1) |
| (2) |
Related party transactions
Research and development expenses
| Name of Related Party | Relationship | For the Three Months Ended December 31, 2025 | For the Three Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Wuhan Haoxun (1) | $ | $ | ||||||||
| Name of Related Party | Relationship | For the Six Months Ended December 31, 2025 | For the Six Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Wuhan Haoxun (1) | $ | - | $ | |||||||
| (1) | On September 1, 2022, the Company entered into an agreement with Wuhan Haoxun for the research and development project. |
19
Consulting expenses
| Name of Related Party | Relationship | For the Three Months Ended December 31, 2025 | For the Three Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Azure(1) | $ | | $ | | ||||||
| Swiftfulfill(2) | ||||||||||
| Total | $ | |||||||||
| Name of Related Party | Relationship | For the Six Months Ended December 31, 2025 | For the Six Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Azure(1) | $ | | $ | | ||||||
| Swiftfulfill(2) | ||||||||||
| Total | $ | |||||||||
| (1) |
| (2) |
Note 13 — Convertible promissory notes
From June 2023 to May 2024, Old Foxx issued four convertible promissory
notes (the “Notes”) to three investors, in an aggregated principal amount of $
Immediately prior to the
Closing on September 26, 2024, the Notes of $
20
Note 14 — Long-term loan
In February 2023, the
Company purchased and financed a vehicle, for which the lender put a lien on the title and will be taken as collateral in the situation
if the Company is unable to make repayment and default on the loan, with a six-year loan for a total of approximately $
The obligation is payable as follows:
| Amount | ||||
| For the six months ending June 30, 2026 | $ | |||
| For the twelve months ending June 30, 2027 | ||||
| For the twelve months ending June 30, 2028 | ||||
| Thereafter | ||||
| Total long-term debt payment | ||||
| Current portion of long-term debt | ( | ) | ||
| Long-term debt – non-current portion | $ | |||
Interest expense for the
three months ended December 31, 2025 and 2024 for the above loan amounted to $
Note 15 — Stockholders’ deficit
Common stock
As of December 31, 2025 and
June 30, 2025, the Company has
Issuance of common stock upon completion of the Reverse Recapitalization
On September 26, 2024, upon
the consummation of the business combination, the Company issued an aggregated total of
The following table presents the number of the Company’s common stock issued upon completion of the Reverse Recapitalization:
| Shares of Common | ||||
| Stock | ||||
| ACAC’s common stock outstanding prior to Reverse Recapitalization | ||||
| Less: redemption of ACAC’s common stock | ( | ) | ||
| Common stock issued to underwriter | ||||
| Total common stock issued upon completion of the Reverse Recapitalization | ||||
Conversion of convertible promissory notes into common stock
On September 26, 2024, upon
the consummation of the business combination, the Company issued an aggregated total of
21
Equity incentive plan
On September 24, 2024, pursuant
to the Equity Incentive Plan (the “EIP”),
On November 5, 2024, the
Company granted
On January 22, 2025, the
Company granted
On April 24, 2025, the Company
cancelled
On July 31, 2025, the Company
cancelled
On November 4, 2025, two of the Company’s employees resigned
from their position with the Company and the Company agreed to accelerate the vesting term for an immediate vesting for a total of
The RSUs are accounted for
as equity awards and are measured at fair value based upon the grant date market value of the Company’s common stock. Compensation
expense is recognized on a straight-line basis over the vesting service period of
The following table presents the total stock-based compensation expenses included in each of the respective expense line items for the periods presented:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Selling expenses | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Total stock-based compensation expenses | $ | $ | $ | $ | ||||||||||||
22
The following table summarizes the activity for all restricted stock units granted for the three and six months ended December 31, 2025 and 2024:
| Shares | Weight average grant date fair value | Total fair value | Weighted average remaining contractual term (in years) | |||||||||||||
| Unvested at June 30, 2025 | $ | $ | ||||||||||||||
| Granted | $ | - | ||||||||||||||
| Vested | $ | - | ||||||||||||||
| Forfeited | ( | ) | $ | ( | ) | - | ||||||||||
| Unvested at September 30, 2025 | $ | |||||||||||||||
| Granted | - | $ | - | |||||||||||||
| Vested | ( | ) | $ | ( | ) | - | ||||||||||
| Forfeited | ( | ) | $ | ( | ) | - | ||||||||||
| Unvested at December 31, 2025 | $ | $ | ||||||||||||||
| Shares | Weight average grant date fair value | Total fair value | Weighted average remaining contractual term (in years) | |||||||||||||
| Unvested at June 30, 2024 | - | $ | $ | - | ||||||||||||
| Granted | - | $ | ||||||||||||||
| Vested | - | $ | ||||||||||||||
| Forfeited | - | $ | ||||||||||||||
| Unvested at September 30, 2024 | - | $ | - | |||||||||||||
| Granted | $ | |||||||||||||||
| Vested | - | $ | ||||||||||||||
| Forfeited | - | $ | ||||||||||||||
| Unvested at December 31, 2024 | $ | $ | ||||||||||||||
As of December 31, 2025,
there was $
Earnout Shares
As described in Note 4 -
Reverse recapitalization, the Earnout Shares that are contingently issuable in connection with the Business Combination are subject to
vesting based on the Company’s financial performance during the earnout period. The entitlement of the first batch of the
23
As of December 31, 2025 and
September 26, 2024 (the Closing Date), the fair value of the earnout liabilities was $
Warrants
In connection with the reverse
recapitalization, each of
Each whole Warrant entitles
the registered holder to purchase one whole share of the Company’s common stock at a price of $
The Company has agreed that as soon as practicable, but in no event later than 30 business days, after the closing of the initial business combination, it will use its commercially reasonable efforts to file, and within 60 business days following its initial business combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the Warrants. The Company will use its commercially reasonable efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. No Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the above, if the Company’s common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event it so elect, it will not be required to file or maintain in effect a registration statement, but it will be required to use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Company may call the
Warrants for redemption, in whole and not in part, at a price of $
| ● | in whole and not in part; |
| ● | upon
not less than |
| ● | if,
and only if, the reported last sale price of the common stock equals or exceeds $ |
On October 3, 2024, the Company’s
shareholders (ACAC’s public shareholders) exercised
24
The summary of warrants activity is as follows:
| Warrants Outstanding | Common Stock Issuable | Weighted Average Exercise Price | Average Remaining Contractual Life | |||||||||||||
| June 30, 2025 | $ | |||||||||||||||
| Granted | $ | - | ||||||||||||||
| Forfeited | $ | - | ||||||||||||||
| Exercised | $ | - | ||||||||||||||
| September 30, 2025 | $ | |||||||||||||||
| Granted | $ | - | ||||||||||||||
| Forfeited | $ | - | ||||||||||||||
| Exercised | $ | - | ||||||||||||||
| December 31, 2025 | $ | |||||||||||||||
| Warrants Outstanding | Common Stock Issuable | Weighted Average Exercise Price | Average Remaining Contractual Life | |||||||||||||
| June 30, 2024 | $ | - | ||||||||||||||
| Granted | $ | |||||||||||||||
| Forfeited | $ | - | ||||||||||||||
| Exercised | $ | - | ||||||||||||||
| September 30, 2024 | $ | |||||||||||||||
| Granted | $ | - | ||||||||||||||
| Forfeited | $ | - | ||||||||||||||
| Exercised | ( | ) | ( | ) | $ | - | ||||||||||
| December 31, 2024 | $ | |||||||||||||||
The Company accounted for
the
Cancellation of Common Stock Held in Escrow
On September 26, 2024 (the
Closing Date), pursuant to the Business Combination Agreement (see Note 4),
On February 18, 2025, these
Note 16 — Concentrations of risks
(a) Major customers
For the three months ended
December 31, 2025, one customers, customer A, which is a third party of the Company, accounted for
25
For the three months ended
December 31, 2024, three customers, customer C, customer A and customer D, which are the third parties of the Company, accounted for
For the six months ended
December 31, 2025, two customers, customer A and customer B, which are the third parties of the Company, accounted for
For the six months ended
December 31, 2024, three customers, customer A, customer B and customer C, which are the third parties of the Company, accounted for
(b) Major suppliers
For the three months ended
December 31, 2025, one supplier, supplier A, which is a third party of the Company, accounted for
For the three months ended
December 31, 2024, one supplier, supplier A, which is a third party of the Company, accounted for
For the six months
ended December 31, 2025, one supplier, supplier A, which is a third party of the Company, accounted for
For the six months ended
December 31, 2024, one supplier, supplier A, which is a third party of the Company, accounted for
(c) Geographic areas
For the three and six months ended December 31, 2025 and 2024, all of the Company’s long-lived assets are located in the United States and all of the Company’s revenues are derived solely from the United States, accordingly, no geographical information is presented.
Note 17 — Leases
Short-term leases
On August 1, 2023, the
Company entered a twelve-month lease agreement to rent a general office and storage space for its purchased inventory for a monthly rental
fee of $
On August 14, 2023,
the Company entered a six-month lease agreement to rent an office for operating purposes with a monthly rental fee of $
Long-term leases
In September 2023, the
Company signed a three-year lease agreement to rent a general office and storage space for business operations with a monthly rent of
$
In June 2024, the Company
signed a six year and 11.5 months lease agreement to rent a general office for business operations with a monthly rent of $
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On July 17, 2024, the Company
signed a five-year and one-half month lease agreement to rent a general office and storage space for business operations with a monthly
rent of $
On July 12, 2024, the Company
signed and further amended a ten-and-half-year lease agreement (“July 2024 Lease”) to rent a
On December 20, 2024, the
Company further expanded the July 2024 Lease to include additional
The ROU assets and lease
liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using
incremental borrowing rate as the effective interest rate, with a weighted average rate of
As of December 31, 2025 and
June 30, 2025, the weighted-average remaining operating lease term of its existing leases is approximately
The following table sets forth the Company’s minimum long-term lease payments in future periods as of December 31, 2025, which represents the operating lease liabilities on the accompanying balance sheet:
| Operating lease payments | ||||
| For the six months ending June 30, 2026 | $ | |||
| For the twelve months ending June 30, 2027 | ||||
| For the twelve months ending June 30, 2028 | ||||
| For the twelve months ending June 30, 2029 | ||||
| For the twelve months ending June 30, 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: discount | ( | ) | ||
| Present value of operating lease liabilities | ||||
| Operating lease liabilities, current portion | ( | ) | ||
| Operating lease liabilities, non-current portion | $ | |||
Operating lease expenses consist of the following:
| Operating lease cost | Classification | For the Three Months Ended December 31, 2025 | For the Three Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Lease expenses | General, and administrative | $ | $ | |||||||
| Lease expenses – short term | General, and administrative | |||||||||
| Total operating lease cost | $ | $ | ||||||||
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| Operating lease cost | Classification | For the Six Months Ended December 31, 2025 | For the Six Months Ended December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||||
| Lease expenses | General, and administrative | $ | $ | |||||||
| Lease expenses – short term | General, and administrative | |||||||||
| Total operating lease cost | $ | $ | ||||||||
For the six months ended
December 31, 2025 and 2024, $
Note 18 — Commitments and contingencies
Contingencies
From time to time, the Company is a party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in aggregate, are not deemed to be material to the unaudited condensed consolidated financial statements.
On November 22, 2024, a plaintiff filed Semensato v. Foxx Development Holdings Inc., et al., No. 2024-1200 (Del. Ch. Ct.), a class action complaint (“Complaint”) in Delaware Chancery Court against the Company and certain “Individual Defendants” (“Joy” Yi Hua, Haitao Cui, “Jeff” Feng Jiang, “Eva” Yiqing Miao and Edmund R. Miller) (“Action”). The lawsuit seeks declaratory relief under provisions of the Delaware General Corporation Law relating to a waiver of the corporate opportunity doctrine that is contained in the Company’s Amended and Restated Certificate of Incorporation. The plaintiff seeks a declaration that the waiver provision is invalid, an injunction against the Company and the Individual Defendants to prevent them from attempting to enforce the waiver, attorneys’ fees, and the costs and disbursements of this action. The Company and each of the Individual Defendants deny any and all wrongdoing alleged in the Complaint. However, to avoid the cost and distraction of litigation, the directors of the board of the Company (the “Board”) determined that it was advisable and in the best interests of the Company and its stockholders to amend Article X of the Charter (the “Amendment”). The Board thus approved and adopted the Second Amended and Restated Certificate of Incorporation of the Company (the “Amended Charter”), and will direct the Amendment to be submitted to the stockholders of the Company for adoption and approval at the next annual meeting of stockholders with the Board’s recommendation that the Amendment be approved and adopted by the stockholders of the Company.
On March 3, 2025, after the
plaintiff was advised of the Board’s approval of the Amended Charter, the plaintiff filed a notice of voluntary dismissal of the
Action as moot, which the Court approved by order dated March 4, 2025. Believing that the swift resolution of this Action was in the best
interests of and benefit to the Company, and without admitting the allegations the plaintiff made in the Complaint, the Company has agreed
to pay $
On November 5, 2025, the Company received a deficiency letter from
the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying
the Company that, for a period of
Lease Commitment
On December 20, 2024, the
Company further expanded the July 2024 Lease (see Note 17) to include additional
28
Reference to Note 17 for detailed disclosure of other entered lease agreements and liabilities.
Risks and Uncertainties
On April 2, 2025, the President of the United States signed Executive Order 14257, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits” (the “Executive Order 14257”), to take action based on the results of certain investigations related to the causes of the U.S.’s large and persistent annual trade deficits in goods. Subsequent to Executive Order 14257, there have been additional executive orders that have, among other actions, effectively suspended the enforcement of certain country-specific tariffs until November 10, 2025. The potential for further changes in trade policies, including new tariffs or changes to existing ones, introduces uncertainty regarding the Company’s future costs, revenues, collectability of account receivables, carrying value of inventories, and overall financial performance. The Company monitors these developments closely and will continue to evaluate their potential impact on its operations, financial condition, and results of operations. The ultimate financial impact of these uncertainties is difficult to quantify at this time.
On July 4, 2025, the One
Big Beautiful Bill Act, Public Law No. 119021 (“OBBBA”), was signed into law by the President of the United States, which
introduced significant and wide-ranging changes to the U.S. tax system. Significant components include restoration of
The Company is currently assessing the potential impact of this legislation on its future financial position, results of operations, and cash flow. In accordance with U.S. GAAP, the effects will be recognized in the period of enactment.
Note 19 — Income taxes
As of December 31, 2025 and
June 30, 2025, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for each
of the three and six months ended December 31, 2025 and 2024 was
Note 20 — Disaggregated information of revenues
Disaggregated information of revenues by product type is as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Tablet products | $ | $ | $ | $ | ||||||||||||
| Mobile phone products | ||||||||||||||||
| Wearable products | ||||||||||||||||
| Subtotal product revenues | ||||||||||||||||
| App service commission revenue | ||||||||||||||||
| Other services | ||||||||||||||||
| Subtotal service revenues | ||||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
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Disaggregated information of revenues by business line is as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Wholesale revenues | $ | $ | $ | $ | ||||||||||||
| E-Commerce revenues | ||||||||||||||||
| Subtotal product revenues | ||||||||||||||||
| App service commission revenue | ||||||||||||||||
| Other services | ||||||||||||||||
| Subtotal service revenues | ||||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
Note 21 — Basic and diluted loss per share
Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted net loss per share attributable to common stockholders adjusts basic loss per share for the potentially dilutive impact of non-participating shares of common stock that are subject to the convertible note, and other securities outstanding. Certain securities may be anti-dilutive and would be excluded from the calculation of diluted loss per share and disclosed separately. Because of the nature of the calculation, particular securities may be dilutive in some periods and anti-dilutive in other periods.
The following table presents the computation of basic and diluted loss per share attributable to common stockholders, for the periods presented:
| For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Net (loss) income – basic and diluted EPS | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average shares outstanding* | ||||||||||||||||
| Basic and diluted (loss) income per share | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| * |
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The following table outlines dilutive common share equivalents outstanding, which are excluded in the above diluted net loss per share calculation, as the effect of their inclusion would be anti-dilutive or the share equivalents were contingently issuable as of each period presented:
| For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Earnout Shares* | ||||||||||||||||
| Warrants ** | ||||||||||||||||
| RSUs** | ||||||||||||||||
| Total | ||||||||||||||||
| * |
| ** |
Note 22 — Segment information
The Company conducts business as a operating segment which is based upon the Company’s organizational and management structure, as well as information used by the Company’s CODM to allocate resources and other factors. The accounting policies of the segment are the same as those described in Note 3.
The key measure of segment
profitability that the
| For The Three Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenues, net | $ | $ | ||||||
| Less cost of goods sold | ||||||||
| Less significant segment expenses: | ||||||||
| Commission expenses | ||||||||
| Marketing consulting expenses | ||||||||
| Products testing and certification expenses | ||||||||
| Warranty expenses | ||||||||
| Marketing and advertising expenses | ||||||||
| Other selling and marketing expenses | ||||||||
| Payroll and payroll tax expenses | ||||||||
| Professional expenses | ||||||||
| Insurance expenses | ||||||||
| Credit losses | ||||||||
| Office expenses | ||||||||
| Rent expenses | ||||||||
| Travel expenses | ||||||||
| Other general and administrative | ||||||||
| Other research and development expenses | ||||||||
| Research and development expenses-related party | - | |||||||
| Stock-based compensation expenses | ||||||||
| Other segment items: | - | - | ||||||
| Interest expense | ||||||||
| Other expense (income), net | ( | ) | ||||||
| Change in fair value of earnout liabilities | - | ( | ) | |||||
| Provision for income taxes | - | - | ||||||
| Segment net (loss) income | $ | ( | ) | $ | ||||
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| For The Six Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenues, net | $ | $ | ||||||
| Less cost of goods sold | ||||||||
| Less significant segment expenses: | ||||||||
| Commission expenses | ||||||||
| Marketing consulting expenses | ||||||||
| Products testing and certification expenses | ||||||||
| Warranty expenses | ||||||||
| Marketing and advertising expenses | ||||||||
| Other selling and marketing expenses | ||||||||
| Payroll and payroll tax expenses | ||||||||
| Professional expenses | ||||||||
| Insurance expenses | ||||||||
| Credit losses | ||||||||
| Office expenses | ||||||||
| Rent expenses | ||||||||
| Travel expenses | ||||||||
| Other general and administrative | ||||||||
| Other research and development expenses | ||||||||
| Research and development expenses-related party | ||||||||
| Stock-based compensation expenses | ||||||||
| Other segment items: | ||||||||
| Interest expense | ||||||||
| Other expense (income), net | ( | ) | ||||||
| Change in fair value of earnout liabilities | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Segment net loss | $ | ( | ) | $ | ( | ) | ||
Note 23 — Subsequent events
The Company evaluated all events and transactions that occurred after December 31, 2025 up through the date the Company issued these unaudited condensed consolidated financial statements. Based on this review, the Company did not identify any subsequent events that would require adjustment or disclosure in the unaudited condensed consolidated financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and the other information set forth in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the Securities and Exchange Commission (the “SEC”) on October 15, 2025. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.
Overview
Foxx Development Holdings Inc. (“we,” “our”, “us”, or the “Company”) was incorporated on November 13, 2023 under the name “Acri Capital Merger Sub I Inc.” On September 26, 2024 (the “Closing”), Acri Capital Acquisition Corporation, a Delaware corporation and our parent company at the time, (“ACAC”) consummated a previously announced business combination pursuant to the terms of the business combination agreement, dated February 18, 2024 (as amended on May 31, 2024, collectively, the “Business Combination Agreement”), by and among us, ACAC, Acri Capital Merger Sub II Inc., a Delaware corporation and our wholly-owned subsidiary at the time (“Merger Sub”), and Foxx Development Inc., a Texas corporation incorporated on May 17, 2017 (“Old Foxx”), pursuant to which (i) ACAC merged with and into us (the “Reincorporation Merger”), with us surviving the Reincorporation Merger, and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as our wholly-owned Delaware subsidiary (the “Acquisition Merger”). The Reincorporation Merger, the Acquisition Merger, and the transactions contemplated under the Business Combination Agreement, are collectively referred to as the “Business Combination”.
Upon Closing, we were renamed as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.” (the “Subsidiary”).
The ACAC securities previously traded on the Nasdaq Capital Market (“Nasdaq”) were delisted and ceased trading following the Closing. On September 27, 2024, one business day after the Closing, our Common Stock and Warrants became listed on the Nasdaq under trading symbols “FOXX” and “FOXXW,” respectively.
Together with our Subsidiary, we are a technology innovation firm specializing in the communications sector. Since our establishment in 2017, we have expanded our presence to include various locations throughout the United States, such as San Francisco, CA, Dallas, TX, Atlanta, GA, Los Angeles, CA, Miami, FL, and New York, NY. This expansion enables us to provide sales, retail, distribution, and after-sales support services while simultaneously driving innovation through active research and development efforts aimed at pioneering new customization standards and services.
Our business model involves providing comprehensive hardware and software specifications to original design manufacturers. Once the products are developed, we engage with third-party agencies to secure necessary testing and certifications, including Equipment Authorizations from the FCC and certifications from the Global Mobile Suppliers Association. We currently offer a range of Foxx-branded products, including tablets, smartphones, wearables, and expects to launch other high-quality communication terminals. Our products are generally priced competitively after considering various factors such as product costs, research and development investments, regulatory compliance, testing expenses, and shipping costs. Our customers are primarily distributors who sell Foxx-branded products in the U.S. public channels and to major carriers in the United States such as T-Mobile, AT&T, and Verizon. Our customers also included individual e-commerce customers from TikTok Shop, which we began our e-commerce operations in March 2024.
We have generated most of our revenue from the sales of tablets and smartphones. We expect to enter the U.S. IoT markets and potentially the private label Mobile Virtual Network Operator (“MVNO”) market, with the aim of growing into a key player both domestically and globally. We have been preparing to enter these markets by adding additional features and providing related services that enable Foxx-branded devices to have IoT and MVNO capabilities.
33
We manage inventory and meet market demand through our build-to-order business model. After customers place purchase orders in bulk with us, we place purchase orders with suppliers to manufacture the products that meet customers’ products specifications and budget requirements. Prior to 2023, we relied on limited suppliers for the manufacturing of mobile phone and tablet products and on limited customers for the distribution of these products. We selectively concentrated our resources on our tablet and mobile phone products because such products held the strongest market potential and revenue generation capability at the time when remote work and online classes became more prevalent.
Beginning in 2023, we adjusted our business strategy to avoid reliance on limited suppliers and customers and to diversify suppliers and customers to mitigate the concentration and reliance risk. We have added new product models across each product line to target a broader range of customers. As of the date hereof, we have reached out to a total of eight wholesale customers to expand our operations in the market and expect to secure purchase orders from these new customers. At the same time, to meet the various product demands of current and prospective customers, we have connected with suppliers who can provide manufacturing support when we secure purchase orders from our customers. In addition, we plan to further expand our product range and to launch an IoT platform to manage all end products sold and began setting up a service team for our business to business (B2B) model in the artificial IoT department. Through the efforts to expand product range and reaching a broader customer base, we will be able to move away from relying on limited customers and suppliers. As we dedicated our resources to expansion, we experienced a significant decrease in the sales of tablet and mobile phone products during the year ended June 30, 2024 as compared to the same period in 2023: (i) new customers began orders in much smaller quantities as compared to our previous customer in order to build up a trustworthy relationship; (ii) similarly and relevantly, we placed order with new suppliers in much smaller quantities to build up relationship and ensure the quality of the products; and (iii) new product models on both tablet and mobile phones order by new customers required approximately 6-9 months from development to mass production.
In addition, on February 8, 2024, the U.S. Federal Communication Commission stopped accepting new enrollment in the Affordable Connectivity Program (ACP) and announced that the ACP will stop accepting new applications and enrollments on February 7, 2024, and will stop funding for enrolled customers starting on April 30, 2024. Temporarily impacted by such a change in ACP, most of our new customers are cutting down their sales teams in anticipation of the reduced customer base, which affects the demand for our products across all channels during the year ended June 30, 2024; and on the other hand, our competitors have stockpiled their products during the year ended June 30, 2024, due to severely declining sales and they have started lower their sale price on their products which affected the demand of our products. However, we may continue to target end-users who are eligible for the Lifeline Program, which is administered by the Universal Service Administrative Company (USAC) and receives funding from the Universal Service Fund, a government program that receives annual contributions from telecommunications companies or their customers. At the same time, because we have initiated our strategic shifts to diversify our product offerings, we expect to target customers who are interested in other mobile devices, tablets, and IoT products. In addition, we began launching our products through TikTok Shop in March 2024 and we expect to grow our sales through this e-commerce channel.
During the six months ended December 31, 2025, we revised our business strategy and decided to exit the AIoT business. Accordingly, in December 2025, we completed the sales of our AIoT products and disposed of related AIoT equipment.
For the six months ended December 31, 2025, our sales remained consistent with our historical level, as we retained our two major customers and continued to sell our new products and services during the period.
The Business Combination
Incorporated as a Delaware corporation under the name “Acri Capital Merger Sub I Inc.” on November 13, 2023, we entered into the Business Combination Agreement on February 18, 2024, as amended on May 31, 2024, by and among us, ACAC, Merger Sub, and Old Foxx.
Upon the Closing of the Business Combination on September 26, 2024, ACAC merged with and into us, with us surviving the Reincorporation Merger, and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as our wholly owned Delaware subsidiary after the Acquisition Merger.
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Merger Consideration
Immediately prior to the effective time of the Reincorporation Merger (the “Reincorporation Merger Effective Time”), which was on September 25, 2024, one business day prior to the Closing, (i) each issued and outstanding ACAC unit was automatically separated into one (1) share of ACAC Class A common stock and one-half (1/2) of one ACAC warrant, and (ii) each share of ACAC Class A common stock held by ACAC stockholders who validly redeemed their shares of ACAC Class A common stock (each “ACAC Redeeming Share”) was automatically cancelled and ceased to exist and thereafter represented only the right to be paid a pro-rata redemption price.
| ● | At the Reincorporation Merger Effective Time on September 25, 2024, (i) each share of ACAC Class A or Class B common stock issued and outstanding (other than ACAC Redeeming Shares) was converted automatically into one (1) share of our common stock, par value $0.0001 per share (the “Common Stock”), and (ii) each issued and outstanding ACAC warrant was converted automatically into one (1) redeemable our warrant, exercisable for one (1) share of our Common Stock at an exercise price of $11.50 per share (the “Warrant”). |
| ● | At the Closing on September 26, 2024, by virtue of the Acquisition Merger and the Business Combination Agreement, and without any action on the part of any party to the Business Combination Agreement or affiliate or security thereof, the issued and outstanding shares of common stock of Old Foxx (“Old Foxx Common Stock”) held by exiting holders of Old Foxx common stock (the “Old Foxx Stockholders”) immediately prior to the Closing (including shares of Old Foxx Common Stock issuable upon conversion of the principal and accrued interest of promissory notes of Old Foxx issued in the Transaction Financing, as defined below) were cancelled and automatically converted into (i) the right to receive, without interest, the applicable portion of 5,000,000 shares of our Common Stock (the “Closing Payment Stock”, 500,000 of which are subject to the Escrow Arrangement noted below), and (ii) the contingent right to receive the applicable portion of the Earnout Shares (as defined below), if, as and when payable in accordance with the earnout provisions of the Business Combination Agreement. |
Upon Closing, we were renamed as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.” (i.e. the Subsidiary).
Pursuant to the Business Combination Agreement, 500,000 shares of the Closing Payment Stock in aggregate were deposited (the “Escrow Arrangement”) to a segregated escrow account and would be released to the Old Foxx Stockholders if and only if, prior to or upon the one-year anniversary of the Business Combination Agreement, the Affordable Connectivity Program (ACP) managed by the U.S. Federal Communication Commission is reauthorized by the U.S. Congress with funding of no less than $4 billion in total for such reauthorized period; or otherwise be cancelled and forfeited by the Registrant without consideration.
Additionally, the Old Foxx Stockholders would be entitled to receive “Earnout Shares”, which refer to 4,200,000 shares of our Common Stock, subject to the vesting schedule (the “Vesting Schedule”) as follows:
| ● | (i) | in connection with the financial performance for the fiscal year ending June 30, 2024: |
| (A) 700,000 Earnout Shares would be issued to Foxx Stockholders on a pro rata basis if and only if our audited consolidated financial statements for the fiscal year ending June 30, 2024 (“2024 Audited Financial Statements”), prepared in accordance with the Generally Accepted Accounting Principles of the United States (“U.S. GAAP”) and filed with the SEC on Form 10-K by us after Closing, would reflect our revenue for the fiscal year ending June 30, 2024 (the “2024 Revenue”) to be no less than $67,000,000 (including $67,000,000) and less than $84,000,000 (excluding $84,000,000); |
| (B) 1,400,000 Earnout Shares would be issued to Foxx Stockholders on a pro rata basis if and only if the Registrant 2024 Revenue reflected in the 2024 Audited Financial Statements would be no less than $84,000,000 (including $84,000,000) and less than $100,000,000 (excluding $100,000,000); |
| (C) 2,100,000 Earnout Shares would be issued to Foxx Stockholders on a pro rata basis if and only if the 2024 Revenue reflected in the 2024 Audited Financial Statements would be no less than $100,000,000 (including $100,000,000); |
provided, however, that the Earnout Shares would be issued and delivered pursuant to one paragraph from (i)(A)-(i)(C) above only once; and
35
| ● | (ii) | In connection with the financial performance for the fiscal year ending June 30, 2025: |
| (A) 700,000 Earnout Shares would be issued to Old Foxx Shareholders on a pro rata basis if and only if our audited consolidated financial statements for the fiscal year ending June 30, 2025 (“2025 Audited Financial Statements”), prepared in accordance with U.S. GAAP and filed with the SEC on Form 10-K by us after Closing, would reflect revenue of the Registrant for the fiscal year ending June 30, 2025 (the “2025 Revenue”) to be no less than $77,050,000 (including $77,050,000) and less than $96,600,000 (excluding $96,600,000); |
| (B) 1,400,000 Earnout Shares would be issued to Old Foxx Stockholders on a pro rata basis if and only if the 2025 Revenue reflected in the 2025 Audited Financial Statements would be no less than $96,600,000 (including $96,600,000) and less than $115,000,000 (excluding $115,000,000); |
| (C) 2,100,000 Earnout Shares will be issued to Old Foxx Stockholders on a pro rata basis if and only if the 2025 Revenue reflected in the 2025 Audited Financial Statements would be no less than $115,000,000 (including $115,000,000); |
provided, however, that the Earnout Shares would be issued and delivered pursuant to one paragraph from (ii)(A) to (ii)(C) above only once.
On October 24, 2024, upon the filing of the 2024 Audited Financial Statements as part of the Annual Report of the Company on Form 10-K filed with the SEC (the “2024 10-K”), any Earnout Shares that the Old Foxx Shareholders would be entitled to receive under the Vesting Schedule were automatically forfeited, as the Company did not meet any of the vesting conditions for the fiscal year ended June 30, 2024 within the Vesting Schedule.
In addition, on October 15, 2025, upon the filing of the 2025 Audited Financial Statements as part of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the SEC (the “2025 10-K”), any Earnout Shares that the Old Foxx Shareholders would be entitled to receive under the Vesting Schedule were automatically forfeited, as the Company did not meet any of the vesting conditions for the fiscal year ended June 30, 2025 within the Vesting Schedule.
In addition to the foregoing, pursuant to that certain amendment to the Underwriting Agreement, by and between EF Hutton LLC and ACAC, dated February 20, 2024, 43,125 shares of our Common Stock were issued to EF Hutton LLC at the Closing.
Public Listing
The ACAC securities previously traded on Nasdaq were delisted without any action needed to be taken on the part of the holders of such securities and are no longer traded on Nasdaq following the Closing. On September 27, 2024, one business day after the Closing, our Common Stock and Warrants became listed on the Nasdaq Capital Market (“Nasdaq”) under trading symbols “FOXX” and “FOXXW,” respectively.
Accounting Treatment
While the legal acquirer in the Business Combination was ACAC, for financial accounting and reporting purposes under U.S. GAAP, Old Foxx was the accounting acquirer, and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the issuance of stock by ACAC for the stock of Old Foxx) does not result in a new basis of accounting, and the unaudited condensed consolidated financial statements of the combined company represent the continuation of the unaudited condensed consolidated financial statements of Old Foxx in many respects. Accordingly, the assets, liabilities and results of operations of Old Foxx became the historical financial statements of the combined company, and ACAC’s assets, liabilities, and results of operations were consolidated with Old Foxx beginning from the Closing on September 26, 2024. Operations prior to the Business Combination are presented as those of Old Foxx. The net assets of ACAC are recognized at historical cost (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded upon execution of the Business Combination.
Transaction Financing
In consideration of market conditions, pursuant to the Business Combination Agreement, the parties agreed to use commercially best efforts to secure financing to pay transaction expense and working capital of Foxx, including without limitation, a PIPE financing, private financing, redemption waiver, convertible debt, forward purchase agreement, backstop, or equity line of credit (collectively, the “Transaction Financing”).
On June 21, 2023, Old Foxx entered into a securities purchase agreement (the “Convertible Note Agreement 1”) with New Bay Capital Limited, a Hong Kong registered company (“New Bay”), and issued a promissory note (“Note 1”) to New Bay in the principal amount of $2 million with an interest rate of 7% per annum, convertible into shares of Old Foxx common stock at $30.00 per share upon the listing of Old Foxx common stock through an initial public offering. On December 21, 2023, Old Foxx issued into another securities purchase agreement (the “Convertible Note Agreement 2”) with New Bay with the same terms and conditions as the Convertible Note Agreement and issued another promissory note (“Note 2”) to New Bay in the principal amount of $2 million.
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In connection with the Business Combination Agreement and all the transaction contemplated therein (the “Business Combination”), in the spring of 2024, Old Foxx and ACAC reached out to New Bay to seek its interest in participating in further financing in connection with the Business Combination.
After negotiations with New Bay, On March 15, 2024, Old Foxx and New Bay agreed to an amendment to amend both Convertible Note Agreement 1 and Convertible Note Agreement 2, and to amend Note 1 and Note 2, by removing the lock-up provisions as provided therein and allowing the unpaid principal and accrued interest on Note 1 and Note 2 to convert to Old Foxx common stock immediately prior to the closing of the Business Combination. New Bay also subscribed for a new promissory note (“Note 3”) in the principal amount of $2 million under the same terms and conditions as amended Note 1 and Note 2 (collectively, the “New Bay Notes”).
On March 15, 2024, Old Foxx and New Bay amended the terms of the Note 1 and Note 2 accordingly, and New Bay subscribed for a new promissory note (“Note 3”) in the principal amount of $2 million under the same terms and conditions as amended Note 1 and Note 2 (collectively “New Bay Notes”).
On February 20, 2024, New Bay introduced Old Foxx to BR Technologies PTE, Ltd. (“BR Technologies”), a Singapore-based company. On May 30, 2024, Old Foxx, BR Technologies and Grazyna Plawinski Limited, a Singapore-based company (“Grazyna”), entered into a securities purchase agreement for issuance of promissory notes in the amount of up to $9.0 million with an interest rate of 7% per annum under the same terms and conditions as provided in the New Bay Notes. A promissory note was issued by Old Foxx to BR (the “Note 4") in the principal amount of $6 million and promissory notes issued by Old Foxx to Grazyna (the “Note 5”) in the total principal amount of $3 million on September 12, 2024.
Immediately prior to the Closing, all the accrued and unpaid principal and interests on the New Bay Notes, Note 4, and Note 5 were converted into: (x) 212,050 shares of Old Foxx common stock for the New Bay Notes, (y) 200,882 shares of Old Foxx common stock for Note 4, and (z) 100,690 share of Old Foxx common stock for Note 5, at a price of $30.00 per share. At the Closing, all of the converted shares of Old Foxx common stock were cancelled in exchange for the holders’ pro rata share of the Closing Payment Shares using the exchange ratio of 3.3033, resulting in (x) 700,473 shares of our Common Stock issued to New Bay, (y) 663,581 shares of our Common Stock issued to BR Technologies, and (z) 332,614 shares of our Common Stock issued to Grazyna.
Nasdaq Listing Update
On November 5, 2025, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, for a period of 30 consecutive business days, our market value of listed securities (“MVLS”) closed below the $35,000,000 MVLS threshold required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have until May 4, 2026 to regain compliance with the MVLS requirement (the “Initial Compliance Period”). To regain compliance, our MVLS must close at $35 million or more for a minimum of ten consecutive business days during the Initial Compliance Period. If we do not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel. We intend to actively monitor our minimum market value of our listed securities and may, if appropriate, consider implementing available options to regain compliance with the MVLS requirement. There can be no assurance that we will be able to regain compliance with Nasdaq Listing Rule 5550(b)(2), or maintain compliance with any other listing requirements.
Key Factors that Affect Operating Results
We believe the key factors affecting our financial condition and results of operations include the following:
Retention of Key Management Team Members
One of the key differentiating factors of us is the rich blended nature of our management team. Our management team comprises executives with extensive experience in electronics industry with IoT services related experience. The wide array of industry experience captured by our management team allows us to deliver advanced technology and superior products to our customers. Losing any member of our key executive team could significantly impact on the quality of services and products that we currently offer. Such departures may prompt customers to explore alternative products or IoT cloud platforms offered by different vendors or service providers.
Investment in technology and talent
We invest significant resources in outsourcing partnerships and dedicate efforts to research and develop new products, solutions, agent platforms, and related services. This commitment is essential to uphold our competitiveness in the industry, especially in the realm of IoT services. Advancing technology and enhancing capabilities are pivotal for enterprise growth, necessitating continual progress in electronic product technologies, novel services, and expanded capabilities.
To maintain and expand our customer base, we must sustain a culture of innovation that aligns with the industry’s evolution. This entails continuously introducing cutting-edge technologies to the market. Our current focus in research and development revolves around bolstering comprehensive communication, storage, and energy solutions, as well as advancing 5G technology. This includes areas such as baseband development, Radio Frequency (RF) layout optimization, Session Initiation Protocol (SIP) integration, and rigorous system testing.
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Our ability to expand our products and services and diversify customer base
Currently, our main revenue stream originates from the sale of tablets and mobile phones. As brand recognition and acceptance grow, we anticipate a surge in user adoption of our wireless services and intelligent products. Our capacity to broaden our products portfolio, offer new services and attract a more diversified customer base could significantly influence our future operating results.
Results of Operations
Comparison for the three months ended December 31, 2025 and 2024
| For the Three Months December 31, | ||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues, net | $ | 16,716,572 | 17,480,231 | (763,659 | ) | (4.4 | )% | |||||||||
| Cost of goods sold | 14,499,792 | 15,289,565 | (789,773 | ) | (5.2 | )% | ||||||||||
| Gross profit | 2,216,780 | 2,190,666 | 26,114 | 1.2 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Selling expense | 1,142,567 | 1,626,740 | (484,173 | ) | (29.8 | )% | ||||||||||
| General and administrative expense | 3,103,576 | 2,042,169 | 1,061,407 | 52.0 | % | |||||||||||
| Research and development – related party | - | 45,584 | (45,584 | ) | (100.0 | )% | ||||||||||
| Research and development | 193,208 | 717,273 | (524,065 | ) | (73.1 | )% | ||||||||||
| Loss from operations | (2,222,571 | ) | (2,241,100 | ) | 18,529 | (0.8 | )% | |||||||||
| Other (expense) income, net | (2,063,343 | ) | 3,665,246 | (5,728,589 | ) | (156.3 | )% | |||||||||
| Provision for income tax | - | - | - | 0.0 | % | |||||||||||
| Net (loss) income | (4,285,914 | ) | 1,424,146 | (5,710,060 | ) | (400.9 | )% | |||||||||
| Foreign currency translation adjustment | (2,266 | ) | - | (2,266 | ) | (100.0 | )% | |||||||||
| Comprehensive (loss) income | $ | (4,288,180 | ) | 1,424,146 | (5,712,326 | ) | (401.1 | )% | ||||||||
Revenues
Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $0.8 million, or 4.4%, to approximately $16.7 million for the three months ended December 31, 2025 as compared to $17.5 million for the three months ended December 31, 2024. The decrease of the total revenue was mainly attributable to the decrease in wearable and other products revenues and service revenues.
Our revenues from our revenue categories are summarized as follows:
| For the Three Months Ended | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Tablet products | $ | 278,720 | $ | 168,360 | ||||
| Mobile phone products | 15,209,368 | 14,845,446 | ||||||
| Wearable products and others | 643,992 | 1,780,637 | ||||||
| Subtotal product revenues | 16,132,080 | 16,794,443 | ||||||
| App service commission revenue | 582,294 | 685,788 | ||||||
| Other services | 198 | - | ||||||
| Subtotal service revenues | 584,492 | 685,788 | ||||||
| Total revenues, net | $ | 16,716,572 | $ | 17,480,231 | ||||
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Tablet product sales were insignificant in our operations for the three months ended December 31, 2025. Revenue from the sales of tablets increased by approximately $0.1 million, or 65.6%, to approximately $0.3 million for the three months ended December 31, 2025 from $0.2 million for the same period in 2024. Revenue from sales of phones slightly increased by approximately $0.4 million, or 2.5%, to approximately $15.2 million for the three months ended December 31, 2025 from $14.8 million for the same period in 2024. Revenue from sales of wearable products and others decreased by approximately $1.1 million, or 63.8%, to approximately $0.6 million for the three months ended December 31, 2025 from $1.8 million for the three months ended December 31, 2024, as the consumers’ spending power was weakened and the demands of the wearable products rate was lowered during the three months ended December 31, 2025 period. Revenue from App service commission decreased by approximately $0.1 million, or 14.8%, to approximately $0.7 million for the three months ended December 31, 2025 from approximately $0.6 million for the three months ended December 31, 2024, as the consumers’ spending power was weakened. Revenue from other services were income generated by our other logistic and warehouse management and MVNO services and it was insignificant in our operations for the three months ended December 31, 2025.
Cost of Goods Sold
Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $0.8 million, or 5.2%, to approximately $14.5 million for the three months ended December 31, 2025 as compared to approximately $15.3 million for the three months ended December 31, 2024. The decrease in cost of goods sold is a direct result of a decrease in our revenue, consistent with the decrease in wearable and other production costs. The decrease is also attributable to the decrease in cost of mobile phone products as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025.
Our cost of goods sold from their revenue categories are summarized as follows:
| For the Three Months Ended | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Tablet products | $ | 251,238 | $ | 132,899 | ||||
| Mobile phone products | 13,620,390 | 13,623,422 | ||||||
| Wearable products and others | 628,039 | 1,533,244 | ||||||
| Other services cost | 125 | - | ||||||
| Total cost of goods sold | $ | 14,499,792 | $ | 15,289,565 | ||||
Our cost of goods sold for tablets increased by approximately $0.1 million, or 89.0%, to approximately $0.2 million for the three months ended December 31, 2025 from $0.1 million for the same period in 2024. Cost of goods sold for mobile phone products for the six months ended December 31, 2025 was approximately $13.6 million, unchanged from the same period in 2024, as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025. Cost of goods sold for wearable products and others decreased by approximately $0.9 million, or 59.0%, to approximately $0.6 million for the three months ended December 31, 2025 from $1.5 million for the same period in 2024, which is the direct result of our negotiation with our vendor to cover shipping and tariff costs beginning in July 2025. Cost of other services was insignificant in our operations for the three months ended December 31, 2025.
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Gross Profit
Our gross profit increased by approximately $26,000, or 1.2%, to approximately $2.2 million for the three months ended December 31, 2025, from $2.2 for the three months ended December 31, 2024.
Our gross profit from their major revenue categories is summarized as follows:
| For the Three Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Tablet products | ||||||||||||||||
| Gross profit | $ | 27,482 | $ | 35,461 | $ | (7,979 | ) | (22.5 | )% | |||||||
| Gross profit percentage | 9.9 | % | 21.1 | % | (11.2 | )% | ||||||||||
| Mobile phone products | ||||||||||||||||
| Gross profit | $ | 1,588,978 | $ | 1,222,024 | $ | 366,954 | 30.0 | % | ||||||||
| Gross profit percentage | 10.4 | % | 8.2 | % | 2.2 | % | ||||||||||
| Wearable products and others | ||||||||||||||||
| Gross profit | $ | 15,953 | $ | 247,393 | $ | (231,440 | ) | (93.6 | )% | |||||||
| Gross profit percentage | 2.5 | % | 13.9 | % | (11.4 | )% | ||||||||||
| App service commission revenue | ||||||||||||||||
| Gross profit | $ | 584,294 | $ | 685,788 | $ | (101,494 | ) | (14.8 | )% | |||||||
| Gross profit percentage | 100.0 | % | 100.0 | % | 0.0 | % | ||||||||||
| Other services | ||||||||||||||||
| Gross profit | $ | 73 | $ | - | $ | 73 | 100.0 | % | ||||||||
| Gross profit percentage | 36.9 | % | - | % | 36.9 | % | ||||||||||
| Total | ||||||||||||||||
| Gross profit | $ | 2,216,780 | $ | 2,190,666 | $ | 26,114 | 1.2 | % | ||||||||
| Gross profit percentage | 13.3 | % | 12.5 | % | 0.7 | % | ||||||||||
For the three months ended December 31, 2025 and 2024, our overall gross profit percentage was 13.3% and 12.5%, respectively. The increase in gross profit percentage of 1.2% was primarily due to the increase in gross profit percentage for mobile phone products, which accounted for 72% of our gross profit.
Gross profit percentage of tablets decreased from 21.1% for the three months ended December 31, 2024 to 9.9% for the same period in 2025. This was primarily due to the decrease of sales of those with higher unit selling prices and lower unit purchase prices, as well as inventory impairment related to slow-moving inventory.
Gross profit percentage for mobile phones increased from 8.2% for the three months ended December 31, 2024 to 10.4% for the same period in 2025. This was primarily due to the increasing sales in new phone models with higher gross profit margins with the reduction of shipping and tariff costs as we negotiated with our vendor to cover such costs.
Gross profit percentage for wearable products and others decreased from 13.9% for the three months ended December 31, 2024 to 2.5% for the same period in 2025. This was primarily due to inventory impairment related to slow-moving inventory.
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For the three months ended December 31, 2025 and 2024, our gross profit percentage of App service commission was 100.0%. This high margin was primarily attributable to the nature of App service commission revenue, which was commission based revenue that was earned at a point in time when the revenue is generated from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional Apps occur at a point in time when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service commission) from our partners without incurring any direct cost, as the pre-installation expenses were included in the research and development expenses prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.
For the three months ended December 31, 2025, our gross profit percentage of other services was 36.9%. We did not have other logistics and warehouse management and MVNO services for the three months ended December 31, 2024.
Operating Expenses
Total operating expenses increased by approximately $8,000, or 0.2%, to approximately $4.4 million for the three months ended December 31, 2025, from approximately $4.4 million for the three months ended December 31, 2024.
Our operating expenses are summarized as follows:
| For the Three Months ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling expenses | $ | 1,142,567 | $ | 1,626,740 | $ | (484,173 | ) | (29.8 | )% | |||||||
| General and administrative expense | 3,103,576 | 2,042,169 | 1,061,407 | 52.0 | % | |||||||||||
| Research and development – related party | - | 45,584 | (45,584 | ) | (100.0 | )% | ||||||||||
| Research and development | 193,208 | 717,273 | (524,065 | ) | (73.1 | )% | ||||||||||
| Total operating expense | $ | 4,439,351 | $ | 4,431,766 | $ | 7,585 | 0.2 | % | ||||||||
The increase in operating expenses was mainly attributed to the following:
Selling Expenses
Selling expenses decreased approximately $0.5 million, or 29.8%, to approximately $1.1 million for the three months ended December 31, 2025, from approximately $1.6 million for the three months ended December 31, 2024. The decreased selling expenses was mainly attributable to approximately $0.3 million decrease in payroll and payroll related expenses, approximately $0.3 million decrease in consulting fees, and approximately $0.1 million decrease in testing and certification expenses during the three months ended December 31, 2025, as we reduced salespersons and consultants and the test for products to cut expenses and improve profitability to improve cost efficiency. The decrease was offset by approximately $0.1 million increase in stock-based compensation as we granted restricted stock units in November 2024 to our sales team members under employee incentive plan and approximately $0.1 million increase in advertising and marketing expenses primarily due to the increased marketing investment in e-commerce channels.
General and Administrative Expenses
General and administrative expenses increased approximately $1.1 million, or 52.0%, to approximately $3.1 million for the three months ended December 31, 2025 from approximately $2.0 million for the three months ended December 31, 2024. The increased general and administrative expense were mainly attributable to the approximately $0.2 million increase in professional expense on audit and accounting fees as we became a public company and incurred additional capital market and legal consulting fees, approximately $0.1 million increase in salary and wages as a result of allocating certain personnel compensation from selling expenses to general and administrative expenses, reflecting a change in the personnel’s primary responsibilities, approximately $0.1 million increase in provision for credit losses due to continued aging of receivables, and approximately $0.7 million increase in rent due to the new factory and warehouse lease that commenced in July 2025.
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Research and Development — related party
Research and development (“R&D”) expenses from a related party decreased by approximately $46,000, or 100.0%, where the decrease was primarily due to an R&D project which commenced in 2024 and was completed in June 2025. During the three months ended December 31, 2024, a related party completed additional 20% of the remaining 5G development project pursuant to a R&D agreement between us and the related party, and we recognized a R&D expense approximately of $46,000 accordingly based on the progression of the R&D project. We did not have this expense for the same period in 2025.
Research and Development
R&D expenses decreased by approximately $0.5 million, or 73.1%, from $0.7 million for the three months ended December 31, 2024 to $0.2 million for the same period in 2025. The decrease was primarily due to the reduction of headcounts and departmental expenses as we scaled back activities in the R&D department.
Other (expense) income, net
Our other (expense) income, net is summarized as follows:
| For the Three Months ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Other (expense) income | ||||||||||||||||
| Interest expense | $ | (2,003,236 | ) | $ | (1,042,198 | ) | $ | (961,038 | ) | 92.2 | % | |||||
| Other (expense) income, net | (60,107 | ) | 1,861 | (61,968 | ) | (3,329.8 | )% | |||||||||
| Change in fair value of earnout liabilities | - | 4,705,583 | (4,705,583 | ) | (100.0 | )% | ||||||||||
| Total other (expense) income, net | $ | (2,063,343 | ) | $ | 3,665,246 | $ | (5,728,589 | ) | (156.3 | )% | ||||||
Total other (expense) income, net decreased by approximately $5.7 million, or 156.3%, to approximately $2.1 million of other expense, net for the three months ended December 31, 2025, from approximately $3.7 million of other income, net for the three months ended December 31, 2024. The decrease was primarily due to the increase of approximately $1.0 million interest expenses incurred related to the financing offered by our vendors based upon the timing of our payment to their accounts payable and the decrease of approximately $4.7 million change in fair value of earnout liabilities as we no longer had earnout liabilities after June 30, 2025.
Provision for income taxes
The provision for income taxes was $0 for each of the three months ended December 31, 2025 and 2024 as we had made full allowance of our deferred tax assets on net operating losses.
Net (loss) income
Net (loss) income decreased by approximately $5.7 million, or 400.9%, to approximately $4.3 million of net loss for the three months ended December 31, 2025, from approximately $1.4 million of net income for the three months ended December 31, 2024. Such change was mainly due to the reasons discussed above.
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Foreign Currency Translation Adjustment
Changes in foreign currency translation adjustment of approximately $2,000 are mainly due to the fluctuation of foreign exchange rates between SGD (the functional currency of one of our subsidiaries) and the USD dollar (reporting currency) for the three months ended December 31, 2025.
Comparison for the six months ended December 31, 2025 and 2024
| For the Six Months December 31, | ||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues, net | $ | 36,939,873 | 40,592,283 | (3,652,410 | ) | (9.0 | )% | |||||||||
| Cost of goods sold | 31,978,526 | 38,003,441 | (6,024,915 | ) | (15.9 | )% | ||||||||||
| Gross profit | 4,961,347 | 2,588,842 | 2,372,505 | 91.6 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Selling expense | 2,044,223 | 2,841,782 | (797,559 | ) | (28.1 | )% | ||||||||||
| General, and administrative expense | 5,532,249 | 3,003,416 | 2,528,833 | 84.2 | % | |||||||||||
| Research and development – related party | - | 68,376 | (68,376 | ) | (100.0 | )% | ||||||||||
| Research and development | 499,640 | 724,301 | (224,661 | ) | (31.0 | )% | ||||||||||
| Loss from operations | (3,114,765 | ) | (4,049,033 | ) | 934,268 | (23.1 | )% | |||||||||
| Other (expense) income, net | (4,036,591 | ) | 3,206,390 | (7,242,981 | ) | (225.9 | )% | |||||||||
| Provision for income tax | - | - | - | 0.0 | % | |||||||||||
| Net loss | (7,151,356 | ) | (842,643 | ) | (6,308,713 | ) | 748.7 | % | ||||||||
| Foreign currency translation adjustment | (8,791 | ) | - | (8,791 | ) | (100.0 | )% | |||||||||
| Comprehensive loss | $ | (7,160,147 | ) | (842,643 | ) | (6,317,504 | ) | 749.7 | % | |||||||
Revenues
Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $3.7 million, or 9.0%, to approximately $36.9 million for the six months ended December 31, 2025 as compared to $40.6 million for the six months ended December 31, 2024. The decrease of the total revenue was mainly attributable to the decrease in mobile phone products revenues, which accounted for 89% of our sales.
Our revenues from our revenue categories are summarized as follows:
| For the Six Months Ended | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Tablet products | $ | 329,190 | $ | 173,115 | ||||
| Mobile phone products | 32,873,429 | 37,722,545 | ||||||
| Wearable products and others | 2,745,077 | 1,780,637 | ||||||
| Subtotal product revenues | 35,947,696 | 39,676,297 | ||||||
| App service commission revenue | 990,060 | 915,986 | ||||||
| Other services | 2,117 | - | ||||||
| Subtotal service revenues | 992,177 | 915,986 | ||||||
| Total revenues, net | $ | 36,939,873 | $ | 40,592,283 | ||||
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Tablet product sales were insignificant in our operations for the six months ended December 31, 2025. Revenue from the sales of tablets increased by approximately $0.1 million, or 90.2%, to approximately $0.3 million for the six months ended December 31, 2025 from $0.1 million for the same period in 2024. Revenue from sales of phones decreased by approximately $4.8 million, or 12.9%, to approximately $32.9 million for the six months ended December 31, 2025 from $37.7 million for the same period in 2024 as the consumers’ spending power was weakened and the mobile phone replacement rate was lowered. Previously, consumers tended to replace their phones every six months, whereas now many keep the same device for over a year. Revenue from sales of wearable products and others increased by approximately $1.0 million, or 54.2%, to approximately $2.7 million for the six months ended December 31, 2025 from $1.7 million for the six months ended December 31, 2024, primarily due to the rollout of new wearable products beginning in October 2024, which resulted in only three months of sales recognized during the six months ended December 31, 2024. Revenue from App service commission increased by approximately $0.1 million, or 8.1%, to approximately $1.0 million for the six months ended December 31, 2025 from $0.9 million for the six months ended December 31, 2024, as we engaged more partners and generate more income by providing installation of App service to our partners on our mobile devices and procure the distribution of these devices to the end users. Revenue from other services was income generated by our other logistic and warehouse management and MVNO services and it was insignificant in our operations for the six months ended December 31, 2025.
Cost of Goods Sold
Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $6.0 million, or 15.9%, to approximately $32.0 million for the six months ended December 31, 2025 as compared to $38.0 million for the six months ended December 31, 2024. The decrease in cost of goods sold is a direct result of a decrease in our revenue, consistent with the decrease in mobile phone production costs, which accounted for 91% of our cost of goods sold.
Our cost of goods sold from their revenue categories are summarized as follows:
| For the Six Months Ended | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Tablet products | $ | 291,326 | $ | 137,569 | ||||
| Mobile phone products | 28,981,959 | 36,332,628 | ||||||
| Wearable products and others | 2,704,751 | 1,533,244 | ||||||
| Other services cost | 490 | - | ||||||
| Total cost of goods sold | $ | 31,978,526 | $ | 38,003,441 | ||||
Our cost of goods sold for tablets increased by approximately $0.2 million, or 111.8%, to approximately $0.3 million for the six months ended December 31, 2025 from $0.1 million for the same period in 2024. Cost of goods sold for mobile phone products decreased by approximately $7.3 million, or 20.2%, to approximately $29.0 million for the six months ended December 31, 2025 from $36.3 for the same period in 2024, which is consistent with the direct result of an decrease in our revenue. The decrease is also attributable to the decrease in unit cost as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025. Cost of goods sold for wearable products and others increased by approximately $1.2 million, or 76.4%, to approximately $2.7 million for the six months ended December 31, 2025 from $1.5 million for the same period in 2024, which is also the direct result of an increase in our revenue as we rolled out some new wearable products beginning in October 2024. Cost of other services was insignificant in our operations for the six months ended December 31, 2025.
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Gross Profit
Our gross profit increased by approximately $2.4 million, or 91.6%, to approximately $5.0 million for the six months ended December 31, 2025, from $2.6 for the six months ended December 31, 2024.
Our gross profit from their major revenue categories is summarized as follows:
| For the Six Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Tablet products | ||||||||||||||||
| Gross profit | $ | 37,864 | $ | 35,546 | $ | 2,318 | 6.5 | % | ||||||||
| Gross profit percentage | 11.5 | % | 20.5 | % | (9.0 | )% | ||||||||||
| Mobile phone products | ||||||||||||||||
| Gross profit | $ | 3,891,470 | $ | 1,389,917 | $ | 2,501,553 | 180.0 | % | ||||||||
| Gross profit percentage | 11.8 | % | 3.7 | % | 8.1 | % | ||||||||||
| Wearable products and others | ||||||||||||||||
| Gross profit | $ | 40,326 | $ | 247,393 | $ | (207,067 | ) | 83.7 | % | |||||||
| Gross profit percentage | 1.5 | % | 13.9 | % | (12.4 | )% | ||||||||||
| App service commission revenue | ||||||||||||||||
| Gross profit | $ | 990,060 | $ | 915,986 | $ | 74,074 | 8.1 | % | ||||||||
| Gross profit percentage | 100.0 | % | 100.0 | % | 0.0 | % | ||||||||||
| Other services | ||||||||||||||||
| Gross profit | $ | 1,627 | $ | - | $ | 1,627 | 100.0 | % | ||||||||
| Gross profit percentage | 76.9 | % | - | % | 76.9 | % | ||||||||||
| Total | ||||||||||||||||
| Gross profit | $ | 4,961,347 | $ | 2,588,842 | $ | 2,372,505 | 91.6 | % | ||||||||
| Gross profit percentage | 13.4 | % | 6.4 | % | 7.0 | % | ||||||||||
For the six months ended December 31, 2025 and 2024, our overall gross profit percentage was 13.4% and 6.4%, respectively. The increase in gross profit percentage of 7.0% was primarily due to the increase in gross profit percentage for mobile phone products, which accounted for 78% of our gross profit.
Gross profit percentage of tablets decreased from 20.5% for the six months ended December 31, 2024 to 11.5% for the same period in 2025. This was primarily due to inventory impairment related to slow-moving inventory.
Gross profit percentage for mobile phones increased from 3.7% for the six months ended December 31, 2024 to 11.8% for the same period in 2025. This was primarily due to the increasing sales of new phone models with higher gross profit margins and the reduction of shipping and tariff costs as we negotiated with our vendor to cover such costs.
Gross profit percentage for wearable products and others decreased from 13.9% for the six months ended December 31, 2024 to 1.5% for the same period in 2025. This was primarily due to the increasing sales in products with lower gross profit margins and inventory impairment related to slow-moving inventory.
For the six months ended December 31, 2025 and 2024, our gross profit percentage of App service commission was 100.0%. This high margin was primarily attributable to the nature of App service commission revenue, which was commission based revenue that was earned at a point in time when the revenue is generated from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional Apps occur at a point in time when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service commission) from our partners without incurring any direct cost, as the pre-installation expenses were included in the research and development expenses prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.
For the six months ended December 31, 2025, our gross profit percentage of other services was 76.96%. We did not have other logistic and warehouse management and MVNO services for the six months ended December 31, 2024.
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Operating Expenses
Total operating expenses increased by approximately $1.5 million, or 21.7%, to approximately $8.1 million for the six months ended December 31, 2025, from approximately $6.6 million for the six months ended December 31, 2024.
Our operating expenses are summarized as follows:
| For the Six Months ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling expenses | $ | 2,044,223 | $ | 2,841,782 | $ | (797,559 | ) | (28.1 | )% | |||||||
| General and administrative expense | 5,532,249 | 3,003,416 | 2,528,833 | 84.2 | % | |||||||||||
| Research and development – related party | - | 68,376 | (68,376 | ) | (100.0 | )% | ||||||||||
| Research and development | 499,640 | 724,301 | (224,661 | ) | (31.0 | )% | ||||||||||
| Total operating expense | $ | 8,076,112 | $ | 6,637,875 | $ | 1,438,237 | 21.7 | % | ||||||||
The increase in operating expenses was mainly attributed to the following:
Selling Expenses
Selling expenses decreased approximately $0.8 million, or 28.1%, to approximately $2.0 million for the six months ended December 31, 2025, from approximately $2.8 million for the six months ended December 31, 2024. The decreased selling expenses was mainly attributable to approximately $0.7 million decrease in commission, payroll and payroll related expenses and approximately $0.4 million decrease in consulting fees during the six months ended December 31, 2025, as we reduced salespersons and consultants to cut expenses and improve profitability to improve cost efficiency. The decrease was offset by approximately $0.2 million increase in stock-based compensation as we granted restricted stock units in November 2024 to our sales team members under employee incentive plan and approximately $0.2 million increase in advertising and marketing expenses primarily due to the increased marketing investment in e-commerce channels.
General and Administrative Expenses
General and administrative expenses increased approximately $2.5 million, or 84.2%, to approximately $5.5 million for the six months ended December 31, 2025 from approximately $3.0 million for the six months ended December 31, 2024. The increased general and administrative expense were mainly attributable to the approximately $0.7 million increase in professional expense on audit and accounting fees as we became a public company and incurred additional capital market and legal consulting fees, approximately $0.4 million increase in salary and wages as a result of allocating certain personnel compensation from selling expenses to general and administrative expenses, reflecting a change in the personnel’s primary responsibilities, approximately $1.3 million increase in rent due to the new factory and warehouse lease that commenced in July 2025, and approximately $0.2 million increase in stock-based compensation expenses as we granted restricted stock units in November 2024 to our general and administrative team members under employee incentive plan.
Research and Development — related party
Research and development (“R&D”) expenses from a related party decreased by approximately $68,000, or 100.0%, where the decrease was primarily due to an R&D project which commenced in 2024 and was completed in June 2025. During the six months ended December 31, 2024, a related party completed additional 30% of the remaining 5G development project pursuant to a R&D agreement between us and the related party, and we recognized a R&D expense approximately of $68,000 accordingly based on the progression of the R&D project. We did not have this expense for the same period in 2025.
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Research and Development
R&D expenses decreased by approximately $0.2 million, or 31.0%, from $0.7 million for the six months ended December 31, 2024 to $0.5 million for the same period in 2025. The decrease was primarily due to the reduction of headcounts and departmental expenses as we scaled back activities in R&D department.
Other (expense) income, net
Our other expense, net is summarized as follows:
| For the Six Months ended December 31, | ||||||||||||||||
| 2025 | 2024 | Change | Change (%) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Other (expense) income | ||||||||||||||||
| Interest expense | $ | (4,015,141 | ) | $ | (1,451,193 | ) | $ | (2,563,948 | ) | 176.7 | % | |||||
| Other (expense) income, net | (21,450 | ) | 1,861 | (23,311 | ) | (1,252.6 | )% | |||||||||
| Change in fair value of earnout liabilities | - | 4,655,722 | (4,655,722 | ) | (100.0 | )% | ||||||||||
| Total other (expense) income, net | $ | (4,036,591 | ) | $ | 3,206,390 | $ | (7,242,981 | ) | (225.9 | )% | ||||||
Total other (expense) income, net decreased by approximately $7.2 million, or 225.9%, to approximately $4.0 million of other expense, net for the six months ended December 31, 2025, from approximately $3.2 million of other income, net for the six months ended December 31, 2024. The decrease was primarily due to the increase of approximately $2.6 million interest expenses incurred related to the financing offered by our vendors based upon the timing of our payment to their accounts payable and the decrease of approximately $4.7 million change in fair value of earnout liabilities as we no longer had earnout liabilities after June 30, 2025.
Provision for income taxes
The provision for income taxes was $0 for each of the six months ended December 31, 2025 and 2024 as we had made full allowance of our deferred tax assets on net operating losses.
Net Loss
Net loss increased by approximately $6.4 million, or 748.7%, to approximately $7.2 million for the six months ended December 31, 2025, from approximately $0.8 million for the six months ended December 31, 2024. Such change was mainly due to the reasons discussed above.
Foreign Currency Translation Adjustment
Changes in foreign currency translation adjustment of approximately $9,000 are mainly due to the fluctuation of foreign exchange rates between SGD (the functional currency of one of our subsidiaries) and the USD dollar (reporting currency) for the six months ended December 31, 2025.
Liquidity and Capital Resources
In assessing liquidity, we monitor and analyses cash on-hand and operating and capital expenditure commitments. Our liquidity needs are to meet working capital requirements, operating expenses, and capital expenditure obligations. Debt financing in the form of convertible promissory note and cash generated from operations have been utilized to finance working capital requirements.
As of December 31, 2025, we had cash and cash equivalents of approximately $1.8 million, while we had working capital deficit of approximately $14.1 million and accumulated deficit of approximately $27.2 million. During the six months ended December 31, 2025, we had net loss of approximately $7.2 million and net operating cash outflow of approximately $93,000.
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If we are unable to generate sufficient funds to finance the working capital requirements within the normal operating cycle of a twelve-month period from the date of the unaudited condensed consolidated financial statements are issued, we may have to consider supplementing our available sources of funds through the following sources:
| ● | Other available sources of financing from banks, other financial institutions or private lenders; |
| ● | Financial support and credit guarantee commitments from our related parties; and |
| ● | Equity financing. |
Our management has determined that the factors discussed above have raised substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.
The following summarizes the key components of cash flows for the six months ended December 31, 2025 and 2024.
| For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net cash used in operating activities | $ | (92,589 | ) | $ | (4,475,232 | ) | ||
| Net cash provided by (used in) investing activities | 8,826 | (68,336 | ) | |||||
| Net cash (used in) provided by financing activities | (12,402 | ) | 7,899,163 | |||||
| Effect of exchange rate changes | (9,604 | ) | - | |||||
| Net change in cash and cash equivalents | $ | (105,769 | ) | $ | 3,355,595 | |||
Operating activities
Net cash used in operating activities was approximately $93,000 for the six months ended December 31, 2025 and was primarily attributable to (i) approximately $7.2 million net loss, (ii) approximately $0.8 million payment in operating lease liabilities as we commenced our factory and warehouse lease in July 2025, (iii) approximately $0.6 million decrease in other payables and accrued liabilities as we committed to repaying supply chain finance interests, and (iv) approximately $0.2 million decrease in other payable – related parties primarily due to the repayment of unconverted working capital loan balance. The cash outflow was offset by (v) non-cash expenses of approximately $3.3 million, which includes depreciation, amortization of operating right-of-use assets, stock-based compensation, impairment of inventories, and provision of credit losses, net, (vi) approximately $3.4 million increase in accounts payable due to increased purchases for dropship orders and the progression of historical purchase orders into production, (vii) approximately $0.3 million decrease in prepaid expenses and other current assets due to the collection of prepayment refund from canceled purchase orders, (viii) approximately $0.9 million decrease in inventories as we engaged in dropship arrangement beginning in July 2025 where products were shipped directly to our customers rather than stored in our warehouse as inventory, (ix) approximately $0.6 million decrease in accounts receivable aligned with the decrease of sales and ongoing collection of outstanding receivables, and (x) approximately $0.3 million decrease in contract assets primarily due to the progression of historical purchase orders into production and the sale of inventory.
Net cash used in operating activities was approximately $4.5 million for the six months ended December 31, 2024 and was primarily attributable to (i) approximately $0.8 million net loss, (ii) approximately $14.0 million increased in inventories because we stored more inventories to meet the demand of our anticipated sales orders, (iii) approximately $7.5 million increased in accounts receivable due to the increase of credit sales during the period, (iv) non-cash expenses of approximately $4.1 million, which primarily attributed to the change in fair value of earnouts, (v) approximately $0.9 million increased in prepaid expenses and other current assets due to our prepaid rent payment in connection with our warehouse lease to be commenced in February 2025, (vi) approximately $0.6 million increased in security deposit because we rented more office space, and (vii) approximately $0.3 million decreased in tax payable of ACAC due to the payment of tax at business combination. The cash outflow was offset by (viii) approximately $22.8 million increased in accounts payable due to purchase of more inventories with vendors to meet customer demand, (ix) approximately $0.9 million increased in other payables and accrued liabilities mainly due to accrued professional fees that associated with business expansion, such as consulting fees, testing fees and legal fees, and (x) approximately $0.1 million increase in contract liabilities due to the increase of sales during the period.
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Investing activities
Net cash provided by investing activities was approximately $9,000 for the six months ended December 31, 2025, attributable to the proceeds from sale of equipment.
Net cash used in investing activities was approximately $68,000 for the six months ended December 31, 2024, attributable to the purchase of some equipment for warehouse and an automobile for our business uses.
Financing activities
Net cash used in financing activities was approximately $12,000 for the six months ended December 31, 2025, mainly attributable to the principal payments of long-term loan of approximately $12,000.
Net cash provided by financing activities was approximately $7.9 million for the six months ended December 31, 2024, mainly attributable to approximately $19.7 million proceeds from the reverse recapitalization and $9.0 million proceeds from issuance of convertible promissory notes, proceeds of approximately $0.1 million from issuance of common stock through exercise of warrant, offset by the payment of redeeming shareholders in connection with the business combination of approximately $20.5 million, the repayment of short-term loans of approximately $0.3 million and approximately $0.1 million in payments of deferred transaction costs.
Off-Balance Sheet Arrangements
As of December 31, 2025, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our members.
Critical Accounting Estimates
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that are critical to the preparation of the unaudited condensed consolidated financial statements. Certain accounting estimates are particularly sensitive because of their significance to the unaudited condensed consolidated financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe that the critical accounting estimates, assumptions, and judgments that have the most significant impact on our unaudited condensed consolidated financial statements are described below.
Income Taxes
We record deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss carryforwards, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes compared to the amounts used for income tax purposes. We regularly review our deferred tax assets for recoverability with consideration for such factors as historical losses, projected future taxable income, and the expected timing of the reversals of existing temporary differences. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes the deferred tax assets, based largely on the history of tax losses, warrant a full valuation allowance based on the weight of available negative evidence. Currently, the key factor in our assumption of providing 100% valuation allowance was purely based on our historical operating losses. Once we begin generating profit, we will re-evaluate whether providing 100% valuation allowance is appropriate or if we can reassess such number.
Inventory Impairment
Inventory impairment is recognized to state our inventories at the lower cost or net realizable value. At least a quarterly basis, inventories are reviewed for potential write-downs for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories and the estimated net realizable value. Net realizable value is determined based on management’s estimates of selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. These estimates require significant judgement and are based upon past sales experience, forecasts for future demand, market conditions, and other relevant factors. During the three months ended December 31, 2025 and 2024, inventory write-downs of $1,086,547 and $0, respectively, were recorded based on management’s estimates. During the six months ended December 31, 2025 and 2024, inventory write-down s of $1,570,862 and $0, respectively, were recorded based on management’s estimates.
When inventories are written down to net realizable value, they are not marked up subsequently based on changes in underlying facts and circumstances.
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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 such that the information relating to us required to be disclosed in our Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. Currently, we are not a party to any material legal proceedings or subject to any material claims. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Currently, we are not a party to any material legal proceedings or subject to any material claims, except as disclosed below.
On November 22, 2024, Ximena Semensato (the “Plaintiff”) filed Semensato v. Foxx Development Holdings Inc., et al., No. 2024-1200 (Del. Ch. Ct.), a class action complaint (the “Complaint”) in Delaware Chancery Court (the “Court”) against the Company and certain “Individual Defendants” (“Joy” Yi Hua, Haitao Cui, “Jeff” Feng Jiang, “Eva” Yiqing Miao and Edmund R. Miller) (the “Action”). The Plaintiff seeks declaratory relief under provisions of the Delaware General Corporation Law relating to a waiver of the corporate opportunity doctrine that is contained in the Company’s Amended and Restated Certificate of Incorporation. The Company and each of the Individual Defendants denied any and all wrongdoing alleged in the Complaint. However, to avoid the cost and distraction of litigation, the directors of the board of the Company determined that it was advisable and in the best interests of the Company and its stockholders to amend Article X of the Charter (the “Amendment”). The Board approved and adopted the Second Amended and Restated Certificate of Incorporation of the Company (the “Amended Charter”), and was planning for the Amendment to be submitted to the stockholders of the Company for adoption and approval at the next annual meeting of stockholders with the Board’s recommendation that the Amendment be approved and adopted by the stockholders of the Company.
On March 3, 2025, after the Plaintiff was advised of the Board’s approval of the Amended Charter, the Plaintiff filed a notice of voluntary dismissal of the Action as moot, which the Court approved by order dated March 4, 2025. Believing that the swift resolution of the Action was in the best interests of and benefit to the Company, and without admitting the allegations Plaintiff made in the Complaint, the Company agreed to pay $85,000 (the “Mootness Fee,” inclusive of a $500 service award to Plaintiff) to Plaintiff’s counsel to resolve the anticipated application by Plaintiff’s counsel for an award of attorneys’ fees and reimbursement of expenses. The Court has not and will not pass judgment on the amount of the Mootness Fee.
The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 1a. Risk Factors
For a discussion of our risk factors, see Part I, Item 1A. “Risk Factors” of the 2025 10-K. The risks and uncertainties that we face are not limited to those set forth in the 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities. There have been no material changes to the Company’s risk factors since the filing of the 2025 10-K, except as discussed below:
Implementation of tariffs and changes to or uncertainties related to tariffs and trade agreements could adversely affect our business.
The U.S. government has recently imposed tariffs on certain foreign goods from a variety of countries and regions that it perceives as engaging in unfair trade practices and has raised the possibility of imposing significant additional tariff increases or expanding the tariffs to capture other types of goods from other countries. For example, on April 2, 2025, the President of the United States signed Executive Order 14257, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits” (the “Executive Order 14257”), to take action based on the results of certain investigations related to the causes of the U.S.’s large and persistent annual trade deficits in goods. In response, many of these foreign governments have imposed retaliatory tariffs on goods that their countries import from the U.S. or have enacted export restrictions on certain goods produced in their country. Uncertainties with respect to tariffs, trade agreements or any potential trade wars could negatively affect the global economy and demand for our products and could have a material adverse effect on our financial condition, results of operations and cash flows. Changes in tariffs and trade barriers could also result in adverse changes in the cost of sourcing and manufacturing our products, which could lead to increased costs that we may not be able to effectively pass on to customers, each of which could materially adversely affect our operating margins, results of operations and cash flows.
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The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could impact our future financial position and results of operations.
Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions where we intend to have business operations. As a result, policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is being proposed or enacted in a number of jurisdictions. Recently, in July 2025, the U.S. government enacted The One Big Beautiful Bill Act, Public Law No. 119021 (the “OBBBA”) which includes a broad range of tax reform provisions that may affect our financial results. The OBBBA includes, among other provisions, the allowance of immediate expensing of qualifying domestic research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act of 2017. The Company is currently assessing the potential impact of this legislation on its future financial position, results of operations, and cash flow. In accordance with U.S. GAAP, the effects will be recognized in the period of enactment.
In addition, many countries have enacted or plan to enact legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting recommendations and action plan that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer-pricing documentation rules, and nexus-based tax incentive practices. Such legislative initiatives may materially negatively impact our financial condition and results of operations generally.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Item 6. Exhibits
| 31.1* | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | |
| 31.2* | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer | |
| 32.1* | Section 1350 Certification of principal executive officer | |
| 32.2* | Section 1350 Certification of principal financial and accounting officer | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | filed herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Foxx Development Holdings Inc. | ||
| Date: February 13, 2026 | By: | /s/ Greg Foley |
| Greg Foley | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: February 13, 2026 | By: | /s/ “Joy” Yi Hua |
| “Joy” Yi Hua | ||
| Chairwoman and Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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