Company: FOXX
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001213900-25-112192
Chunk: 103

Company: Foxx Development Holdings Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Item 8
Chunk 103
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izes 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 September 30, 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.

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.

10

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