Company: FOXX
Filing Date: 2025-10-15
Form Type: 10-K
Source: 0001213900-25-098953
Chunk: 1382

Company: Foxx Development Holdings Inc.
Filing Date: 2025-10-15
Form: 10-K
Item: Item 7A
Chunk 1382
---
 classified
as a liability and measured at fair value, with changes in fair value included in the consolidated statements of operations. As of June 30, 2025, the Earnout Shares were forfeited (See Note 17).

Convertible
instrument

The
Company accounts for its convertible instrument in accordance with ASC 470-20 “Debt with Conversion and Other Options”,
whereby the convertible instrument is initially accounted for as a single unit of account, unless it contains a derivative that must
be bifurcated from the host contract in accordance with ASC 815-15 Derivatives and Hedging — Embedded Derivatives or
the substantial premium model in ASC 470-20 Debt applies. If the equity securities underlying the embedded conversion
option are readily convertible to cash, such as publicly traded common shares, the embedded conversion option is likely to meet the net
settlement criterion to be considered a derivative. If the equity securities underlying the conversion option are not readily convertible
to cash, the embedded conversion option may not meet the net settlement criterion, and therefore would not meet the definition of a derivative.
Because the convertible instrument has a fixed conversion price and therefore, it lacks an underlying and does not meet the requirement
of a derivative. As a result, the Company determined its embedded conversion option does not meet the definition of a derivative for
bifurcation. All of the convertible notes were converted into the Company’s common stock on September 26, 2024 as part of the business
combination. As of June 30, 2025, there were no other outstanding convertible instruments.

Revenue
recognition

The
Company recognizes revenue to depict the transfer of promised goods or services (that is, an asset) to customers in an amount that reflects
the consideration to which the Company expects to receive in exchange for those goods or services. An asset is transferred when the customer
obtains control of that asset. It also requires the Company to identify contractual performance obligations and determine whether revenue
should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.

To
achieve that core principle, the Company applies the five steps defined under ASC 606 “Revenue from Contracts with Customers”:
(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, (iv) allocate the transaction