Company: FOXX
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001213900-25-112192
Chunk: 12

Company: Foxx Development Holdings Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Item 1
Chunk 12
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 costs of completion, disposal, and transportation.
Cost is determined using the “First in, First out” method. Inventories mainly include electronic products and accessories,
which are purchased from the Company’s suppliers as merchandized goods and freight-in. At least a quarterly basis, inventories are reviewed
for potential write-downs for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories
and the estimated net realizable value. The estimated selling prices in the ordinary course of business, less reasonably predictable costs
of completion, disposal and transportation, based upon forecasts for future demand and market conditions. When inventories are written
down to net realizable value, they are not marked up subsequently based on changes in underlying facts and circumstances. As of September
30, 2025 and June 30, 2025, the Company had inventories of $11,456,708 and $12,686,739, respectively. During the three months ended September
30, 2025 and 2024, $484,315 and $0 inventory write-down was recorded, respectively.

7

Contract assets

Contract assets consisted
of cash deposited or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any advances
to suppliers determined by management that such advances will not be in receipts of inventories or refundable, the Company will recognize
an allowance account to reserve such balances. Management reviews its advances to suppliers on a regular basis to determine if the allowance
is adequate and adjusts the allowance when necessary. Delinquent account balances are written off against allowance for credit losses
after management has determined that the likelihood of collection is not probable. The Company’s management continues to evaluate
the reasonableness of the valuation allowance policy and update it if necessary. As of September 30, and June 30, 2025, no allowance for
credit losses on contract assets was recorded.

Contract liabilities

Contract liabilities mainly
consist of deposits received from customers before all the relevant criteria for revenue recognition are met and are recorded as customer
deposits.

Earnout liabilities

At the Closing of the Business
Combination, pursuant to the Business Combination Agreement, the stockholders of Old Foxx were entitled to receive up to a total of 4,200,000 contingent
Earnout Shares (as defined below) in the form of common stock of the Company, par value $0.0001 per share (“Common Stock”).