Company: FOXX
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014221
Chunk: 109

Company: Foxx Development Holdings Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 109
---
 on estimation and judgment from the Company’s management.

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 Topic 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 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, depends 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 withheld 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, 2024 and 2023, the Company did not recognize any estimated
sales returns. There are no transaction prices allocated to future periods or future obligations and no revenue was recognized for performance
obligations satisfied in previous periods.

9

Gross versus Net Revenue Reporting

The determination of whether
revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent
in the transaction in accordance with ASC 606-10-55 and depends on whether the promise to the customer is to provide the products
or to facilitate a sale by a third party. The nature of the promise depends on whether the Company controls the products prior to transferring
them. When the Company controls the products, the promise is to provide and deliver the products and revenue is presented gross. When