Company: FOXX
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014221
Chunk: 110

Company: Foxx Development Holdings Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 110
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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 to pay the Company of the App revenue share (service commission) as revenue. The Company’s
Partners are primarily responsible to develop and maintain the App, is the primary obligor to users of the of the App and determines and
controls the revenue shares (service commission) to pay the Company. No refund or return policy is provided to the Partners.

Practical expedient

The Company applies the practical
expedient in ASC 606 to expense costs as incurred for costs to obtain a contract with a customer when the amortization period is one year
or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those
costs to be longer than one year which need to