Company: FOXX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043597
Chunk: 19

Company: Foxx Development Holdings Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 19
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 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 promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A
and the indicators in ASC 606-10-55-39. The Company considers this guidance in conjunction with the terms in its arrangements with
both suppliers and customers.

The Company orders the products,
and the suppliers ship the products to the Company’s warehouse where the Company inspects and accepts the products. This enables
the Company to direct the use of these products but to also bear inventory risk as legal owners. The Company has the responsibility of
fulfilling the promise to provide the products to its customers, and to provide a one-year warranty period for each customer’s order.
In addition, when establishing the selling prices for delivery of the products, the Company has control to set its selling price at the
E-commerce platform. All these factors indicate that the Company is acting as the principal in this transaction. As a result, revenue
from the E-Commerce customer is presented on a gross basis.

App Service Commission Revenue

The Company provides installation
of app service to its App developers (the “Partners”) on the Company’s mobile devices and procure the distribution of
these devices to end users (the “App Service”). The Company recognizes the App Service commission revenue on a net basis at
a point in time when the revenue is generated from the App that is developed by the Partners and installed on the Company’s mobile
devices (the “App”), that is when clicks and/or impressions occur at a point in time when the end users of the mobile devices
use the App and its Partners are obligated