Company: FOXX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043597
Chunk: 125

Company: Foxx Development Holdings Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 8
Chunk 125
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) the entity satisfies a performance obligation.

The Company’s main
business is selling electronic products to 1) wholesale customers and 2) individual E-commerce customers, and the Company’s revenue
also came from 3) the App service commission by providing installation of App services to the Company’s mobile devices.

8

Wholesale Customers

The Company recognizes a
contract with a customer when the contract is committed in writing, 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 ASC 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, either on Free on Board (“FOB”) shipping point or destination, depending on the specified contract. The
Company’s customers generally either pay the order in full balance prior to shipment or in partial payments with credit terms of
30 to 90 days after shipment depends on the specified contract. No sales returns are being given to its wholesale customers as they
were being given additional 2-3% of products on top of each customer’s order (see Note 3 - “Warranty” below). There
are no transaction prices allocated to future periods or future obligations and no revenue was recognized for performance obligations
satisfied in previous periods.

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
the Company does not control the products, the promise is to facilitate the sale and revenue is presented net.

To distinguish a promise
to provide products from a