Company: FOXX
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001213900-25-112192
Chunk: 99

Company: Foxx Development Holdings Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Item 8
Chunk 99
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 the financial performance threshold for the years ended
June 30, 2025 and 2024.

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. As of September 30, 2025, and June 30, 2025, there were no other
outstanding convertible instruments.

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.

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