Company: FOXX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043597
Chunk: 126

Company: Foxx Development Holdings Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 8
Chunk 126
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 promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A and
the indicators in ASC 606-10-55-39. The Company considers this guidance in conjunction with the terms in its arrangements with both
suppliers and customers.

The Company orders the products
and pays in advance from its supplier. When the supplier has completed production, the Company inspects and accepts the products in its
suppliers’ warehouse or at the designated logistic warehouse of the supplier. This enables the Company to direct the use of these
products but to also bear inventory risk as legal owners. The Company has the responsibility of fulfilling the promise to provide the
products to its customers, and also includes an additional 2-3% of products on top of each customer’s order, which covers any damage
incurred in shipping and no refund and no return will be granted to customers; or provided a one-year warranty period with no additional
2-3% of products on top of each customer’s order, depending on the specified contract. In addition, when establishing the selling
prices for delivery of the products, the Company has control to set its selling price. All these factors indicate that the Company is
acting as the principal in this transaction. As a result, revenue from the wholesale customer is presented on a gross basis.

Warranty

The Company generally provides 30 days warranties or 1-year warranties
for its product sold to its wholesale customer if an additional 2-3% of products on top of each customer’s order was not provided.
For the sale transactions that were provided with 2-3% of products on top of each customer’s order, these additional 2-3% products
were recognized as cost of goods sold at the same time the respective sale is recognized. For the sales transactions that the Company
provided limited warranties to both wholesale customers and e-commerce customers, the Company records estimated future warranty costs
under ASC 460 “Guarantees”. Such estimated costs for warranties are estimated at the time of delivery, and these
warranties are not service warranties separately sold by the Company. Generally, the estimated claim rates of warranties are based on
actual warranty experience or the Company’s best estimate. As of March 31, 2025 and June 30, 2024, the Company accrued warranty
reserves of $361,960 and $48,361, respectively recorded under accrued liabilities and other current liabilities