Company: FOXX
Filing Date: 2025-01-10
Form Type: S-1
Source: 0001213900-25-002199
Chunk: 92

Company: Foxx Development Holdings Inc.
Filing Date: 2025-01-10
Form: S-1
Chunk 92
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 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 52 of available negative evidence. Currently, the key factor on our assumption of providing 100% valuation allowance was purely based on our historical operating losses. Once we began generating profit, we will re -evaluatewhether providing 100% valuation allowance is appropriate or if we can reassess such number. Earnout Liabilities At the closing of the Business Combination, pursuant to the Business Combination Agreement, the shareholders of Old Foxx were entitled to receive up to a total of 4,200,000 contingent earnout shares (“Earnout Shares”) in the form of our common stock. The Earnout Shares will be issued upon certain vesting schedules based on our financial performance for the fiscal year ended June 30, 2024 and 2025. The Earnout Shares are classified as a liability at the closing of the Business Combination on September 26, 2024 and measured at fair value at each reporting period, with changes in fair value included in the consolidated statements of operations. When determining the fair value measurements for earnout liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market -basedrisk measurements or assumptions that market participants would use in pricing the earnout liabilities arising from the Business Combination.