FOXX 10-K & 10-Q changes, risk factors and insider trading
Foxx Development Holdings Inc. (also FOXXW) · Nasdaq · Computer Communications Equipment · CIK 2013807 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Not applicable to smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Nasdaq Listing Update”
New heading “Tariff and Customer Demand”
New heading “Product Costs and Pricing”
New heading “Macroeconomic Conditions and Consumer Demand”
New heading “Provision of credit losses”
New heading “Impairments of right-of-use assets”
New heading “Allowance for Credit Losses”
New heading “Inventory Impairment”
New heading “Impairment of long-lived assets”
Removed heading “The Business Combination”
Removed heading “Merger Consideration”
Removed heading “Transaction Financing”
Removed heading “Earnout Liabilities”
Largest changes
Our cost of goods sold for tabletssee in full comparisondecreasedincreased by approximately$0.1$0.4 million, or13.4%,73.5%, to approximately$0.4$0.8 million for the year ended June 30,20252026 from$0.5approximately $0.4 million for the same period in2024.2025, consistent with the increase in sales of tablets. Cost of goods sold for mobile phone productsincreaseddecreased by approximately$55.0$11.1 million, or2,110.3%,19.2%, to approximately$57.6$46.5 million for the year ended June 30,20252026 from$2.6approximately $57.6 million for the same period in2024,2025, which is consistent with the direct result ofana decrease in our revenue. The decrease is also attributable to the decrease in unit cost as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025 offset by the increaseinofrevenueinventoryfromimpairmentsalesrelated to slow-moving inventory ofmobileapproximatelyphone$5.8products.million. Cost of goods sold for wearable products and others increased by approximately$3.0$0.6 million, or100.0%,17.9%, to approximately$3.0$3.6 million for the year ended June 30,20252026 from$0$3.0for the same period in 2024, which is also the direct result of an increase in our revenue as we rolled out some new wearable products beginning in October 2024. Cost of goods sold for other services increased by approximately $48,000, or 100.0% to approximately $48,000 for the year ended June 30, 2025 from $0million for the same period in2024,2025, which isalsoprimarilytheduedirecttoresultinventory impairment related to slow-moving inventory of approximately $1.0 million. Cost ofanotherincreaseservices was insignificant in ourotheroperationsrevenue as we started to generate income by providing other services duringfor theyearyears ended June 30, 2026 and 2025.
“For the years ended June 30, 2026 and 2025, our overall gross profit percentage was 3.2% and 7.2%, respectively. The decrease in gross profit percentage of 4.0% was primarily due to the decrease in gross profit percentage across nearly all categories, which collectively accounted for 90% of our gross profit, with the exception of tablet, attributable to inventory impairment, tariffs and related pricing uncertainty, and product costs. …”see in full comparison
“Inventory impairment is recognized to state our inventories at the lower cost or net realizable value. 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. Net realizable value is determined based on management’s estimates of selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. …”see in full comparison
“The impairment of long-lived assets is reviewed on an annual basis and whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. During the period, management identified certain impairment indicators for right-of-use assets, including a current period loss, a history of losses, and management’s decision to sublease our warehouse. These factors required management to assess whether the carrying value of the asset group was recoverable. …”see in full comparison
“Net cash used in operating activities was approximately $0.4 million for the year ended June 30, 2026 and was primarily attributable to (i) approximately $52.7 million net loss, (ii) approximately $1.7 million payment in operating lease liabilities as we commenced our warehouse leases in July 2025 and January 2026, (iii) approximately $0.6 million increase in accounts receivable due to the increase of credit sales during the year, and (iv) approximately $0.3 million decrease in other payable – related parties primarily due to the repayment of unconverted working capital loan balance. …”see in full comparison
Full comparison: every changed paragraph (101)
Foxx
Development Holdings
Inc. (“we,” “our”, “us”, or the “Company”) was incorporated on November
13, 2023 under
the name “Acri Capital Merger Sub I Inc.” On September 26, 2024 (the “Closing”), Acri Capital
Acquisition Corporation (“ACAC”), Corporation,
a Delaware corporation and our parent company at the time, (“ACAC”) consummated a previously announced
business combination
pursuant to the terms of the business combination agreement, dated February 18, 2024 (as amended on May 31, 2024,
collectively, the “Business
Combination Agreement”), by and among us, ACAC, Acri Capital Merger Sub II Inc., a Delaware corporation
and our wholly-owned subsidiary
at the time (“Merger Sub”), and Foxx Development Inc., a Texas corporation incorporated on
May 17, 2017 (“Old Foxx”),
pursuant to which (i) ACAC merged with and into us (the “Reincorporation Merger”),
with us surviving the Reincorporation Merger,
and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as our wholly-owned
Delaware subsidiary (the “Acquisition
Merger”). The Reincorporation Merger, the Acquisition Merger, and the transactions
contemplated under the Business Combination Agreement,
are collectively referred to as the “Business Combination”.
Upon
Closing, we were renamed
as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.”
(the “Operating Subsidiary”).
The
ACAC securities previously
traded on the Nasdaq Capital Market (“Nasdaq”) were delisted and ceased trading following the
Closing. On September 27, 2024,
one business day after the Closing, our Common Stock and WarrantWarrants became listed on the Nasdaq under trading
symbols “FOXX”
and “FOXXW,” respectively.
Our business model involves
providing comprehensive hardware and software specifications to original design manufacturers. Once the products are developed, we engage
with third-party agencies to secure necessary testing and certifications, including Equipment Authorizations from the FCC and certifications
from the Global Mobile Suppliers Association. We currently offer a range of Foxx-branded products, including tablets, smartphones, wearables,
and expects to launch other high-quality communication terminals. Our products are generally priced competitively after considering various
factors such as product costs, research and development investments, regulatory compliance, testing expenses, and shipping costs. Our
customers are primarily distributors who sell Foxx-branded products in the U.S. public channels and to major carriers in the United States
such as T-Mobile, AT&T, and Verizon. Our customers also included individual E-Commercee-commerce customers from TikTok Shop, which we began
our E-Commercee-commerce operations in March 2024. We also provide an App Service by installing applications from App developer partners onto its
mobile devices and facilitating the distribution of these devices to end users.
We
have generated most of our revenue from the sales of tablets and smartphones. We expect to enter the U.S. IoT markets and potentially
the private label Mobile Virtual Network Operator (“MVNO”) market, with the aim of growing into a key player both domestically
and globally. We have been preparing to enter these markets by adding additional features and providing related services that enable
Foxx-branded devices to have IoT and MVNO capabilities.
We
manage inventory and meet
market demand through our build-to-order business model. After customers place purchase orders in bulksbulk with
us, we place purchase orders
with suppliers to manufacture the products that meet customers’ products specifications and budget
requirements. Prior to 2023,
we have relied on limited suppliers for the manufacturing of mobile phone and tablet products and on limited
customers for the distribution
of these products. We selectively concentrated our resources on our tablet and mobile phone products because
such products held the strongest
market potential and revenue generation capability at the time when remote work and online classes became
more prevalent.
Beginning
in 2023, we adjusted
our business strategy to avoid reliance on limited suppliers and customers and to diversify suppliers and customers
to mitigate the concentration
and reliance risk. We have added new product models across each product line to target a broader range
of customers. As of the date hereof,
we have reached out to a total of eighteentwenty-three wholesale customers to expand our operations in the market
and expectsexpect to secure purchase
orders from these new customers. At the same time, to meet the various product demands of current and
prospective customers, we have connected
with suppliers who can provide manufacturing support when we secure purchase orders from our
customers. In addition, we plan to further expandexpanded our product
range offeringsfurther and tolaunched launchInternet anof Things (IoT) platformproducts such as water leak sensors. Because of our strategic shifts to managediversify
our allproduct end-productsofferings, sold,we expanded our sales channels to target end-users who are interested in mobile devices, tablets, wearables, and
IoT products. We began launching our products through TikTok Shop in March 2024 and stepped up our sales efforts through our Amazon store
and beganother settingonline upplatforms. aWe serviceexpect teamto forkeep growing our businesssales tothrough businessmultiple (B2B)e-commerce model in the artificial IoT department. Through the efforts of
expanding product offerings and reaching to broader customer base, we will be able to move away from relying on limited customers and
suppliers.channels.
In January 2026, we began engaging in dropship arrangement to reduce additional freight cost and usage of our warehouse spaces. This change of business strategy helped us to reduce our freight costs and promoted better gross margin with our wholesales business.
Sales for the fiscal year ended June 30, 2026 were $52,584,432, a decrease of $13,334,734, or 20.2%, compared to $65,919,166 for the fiscal year ended June 30, 2025. The decrease was primarily attributable to two factors. First, tariffs imposed on imported goods, together with uncertainty as to their scope and duration, caused significant volatility in our landed costs and selling prices during the period; in response, certain customers deferred or reduced purchase commitments pending greater pricing clarity, which lowered order volumes. Second, a sharp increase in memory chip prices raised our product costs, and we increased selling prices in an effort to preserve gross margin. Our two major customers, which accounted for 77.9% of our total sales, did not accept the higher prices to the extent we anticipated, and the resulting reduction in order volumes further reduced sales. These factors were compounded by broader macroeconomic conditions, including sustained inflation that weakened consumer purchasing power and lengthened the mobile phone replacement cycle, which we believe has extended from approximately one to two years to more than two years.
In
addition, on February 8, 2024, the U.S. Federal Communication Commission stopped accepting new enrollment in the Affordable
Connectivity Program (ACP) and announced that the ACP will stop accepting new applications and enrollments on February 7, 2024,
and will stop funding for enrolled customers starting on April 30, 2024. Temporarily impacted by such a change in ACP, most of our
new customers cut down their sales teams in anticipation of the reduced customer base, which affected the demand for our products
across all channels during the year ended June 30, 2024; and on the other hand, our competitors have stockpiled their products during
the year ended June 30, 2024, due to severely declining sales and they have started lower their sale price on their products which affected
the demand of our products. However, we may continue to target end-users who are eligible for the Lifeline Program, which is administered
by the Universal Service Administrative Company (USAC) and receives funding from the Universal Service Fund, a government program that
receives annual contributions from telecommunications companies or their customers. At the same time, because we have initiated our strategic
shifts to diversify our product offerings, we expect to target customers who are interested in other mobile devices, tablets, and IoT
products. In addition, we began launching our products through TikTok Shop in March 2024 and we expect to grow our sales through this
E-Commerce channel.
For
the year ended June 30, 2025, we experienced a significant increase in the sales of mobile phone
products, as we have added three new major customers. In addition, we
have launched new wearable products, such as smart watches, smart rings, smart glasses, trackers and headsets, and App service commission
revenue during the period which have driven up our sales for the year ended June 30, 2025 as compared to the same period in 2024.
The
Business Combination
Incorporated
as a Delaware corporation under the name “Acri Capital Merger Sub I Inc.” on November 13, 2023, we entered into the Business
Combination Agreement on February 18, 2024, as amended on May 31, 2024, by and among us, ACAC, Merger Sub, and Old Foxx.
Upon
the Closing of the Business Combination on September 26, 2024, ACAC merged with and into us, with us surviving the Reincorporation Merger,
and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as our wholly-owned Delaware subsidiary after the Acquisition
Merger.
Merger
Consideration
Immediately
prior to the effective time of the Reincorporation Merger (the “Reincorporation Merger Effective Time”), which was on September
25, 2024, one business day prior to the Closing, (i) each issued and outstanding ACAC unit was automatically separated into one (1) share
of ACAC Class A common stock and one-half (1/2) of one ACAC warrant, and (ii) each share of ACAC Class A common stock held by stockholders of ACAC
who validly redeemed their shares of ACAC Class A common stock (each “ACAC Redeeming Share”) was automatically cancelled
and ceased to exist and thereafter represented only the right to be paid a pro-rata redemption price.
Upon
Closing, we were renamed as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.”
(i.e. the Operating Subsidiary).
Pursuant
to the Business Combination Agreement, 500,000 shares of the Closing Payment Stock in aggregate were deposited (the “Escrow
Arrangement”) to a segregated escrow account and would be released to the Original Foxx Shareholders if and only if, prior to or upon
the one-year anniversary of the Business Combination Agreement, the Affordable Connectivity Program (ACP) managed by the U.S. Federal
Communication Commission is reauthorized by the U.S. Congress with funding of no less than $4 billion in total for such reauthorized
period; or otherwise be cancelled and forfeited by the Registrant without consideration.
Additionally,
the Original Foxx Shareholders would be entitled to receive “Earnout Shares”, which refer to 4,200,000 shares of our Common Stock,
subject to the vesting schedule (the “Vesting Schedule”) as follows:
provided,
however, that the Earnout Shares would be issued and delivered pursuant to one paragraph from (i)(A)-(i)(C) above only once; and
provided,
however, that the Earnout Shares would be issued and delivered pursuant to one paragraph from (ii)(A) to (ii)(C) above only once.
On October 24, 2024, upon
the filing of the 2024 Audited Financial Statements as part of the Annual Report of the Company on Form 10-K filed with the SEC (the “2024
10-K”), any Earnout Shares that the Original Foxx Shareholders may be entitled to receive under the Vesting Schedule were automatically
forfeited, as the Company did not meet any of the vesting conditions for the fiscal year ended June 30, 2024 as provided in the Vesting
Schedule. The Earnout Shares in connection with the fiscal year ended June 30, 2025 were also forfeited automatically as the Company did
not meet any of the vesting conditions for the fiscal year ended June 30, 2025 as provided in the Vesting Schedule.
In
addition to the foregoing, pursuant to that certain amendment to the Underwriting Agreement, by and between EF Hutton LLC and ACAC, dated
February 20, 2024, 43,125 shares of our Common Stock were issued to EF Hutton LLC at the Closing.
Public
Listing
The
ACAC securities previously traded on Nasdaq were delisted without any action needed to be taken on the part of the holders of such securities
and are no longer traded on Nasdaq following the Closing. On September 27, 2024, one business day after the Closing, our Common Stock
and Warrant became listed on the Nasdaq Capital Market (“Nasdaq”) under trading symbols “FOXX” and “FOXXW,”
respectively.
While
the legal acquirer
in the Business Combination was ACAC, for financial accounting and reporting purposes under U.S. GAAP, Old Foxx was
the accounting acquirer,
and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization
(i.e., a capital
transaction involving the issuance of stock by ACAC for the stock of Old Foxx) does not result in a new basis of accounting,
and the unaudited condensed consolidated
financial statements of the combined company represent the continuation of the unaudited condensed
consolidated financial statements of Old Foxx in many respects.
Accordingly, the assets, liabilities and results of operations of Old
Foxx became the historical financial statements of the combined
company, and ACAC’s assets, liabilities, and results of operations
were consolidated with Old Foxx beginning from the Closing on
September 26, 2024. Operations prior to the Business Combination are presented
as those of Old Foxx. The net assets of ACAC are recognized
at historical cost (which is expected to be consistent with carrying value),
with no goodwill or other intangible assets recorded upon
execution of the Business Combination.
Nasdaq Listing Update
On July 22, 2026, we received a deficiency letter from the Nasdaq Listing Qualifications Department of the Nasdaq notifying us that, for a period of 30 consecutive business days, our MVLS closed below the $35,000,000 MVLS threshold required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have until January 19, 2027 to regain compliance with the MVLS Requirement (the “MVLS Compliance Period”). To regain compliance, our MVLS must close at $35 million or more for a minimum of ten consecutive business days during the MVLS Compliance Period. If we do not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel. We intend to actively monitor the market value of our listed securities and may, if appropriate, consider implementing available options to regain compliance with the MVLS Requirement. There can be no assurance that we will be able to regain compliance with Nasdaq Listing Rule 5550(b)(2), or maintain compliance with any other listing requirements.
Transaction
Financing
In
consideration of market conditions, pursuant to the Business Combination Agreement, the parties agreed to use commercially best efforts
to secure financing to pay transaction expense and working capital of Foxx, including without limitation, a PIPE financing, private financing,
redemption waiver, convertible debt, forward purchase agreement, backstop, or equity line of credit (collectively, the “Transaction
Financing”).
On June 21, 2023, Old Foxx entered into a securities purchase agreement
(the “Convertible Note Agreement 1”) with New Bay Capital Limited, a Hong Kong registered company (“New Bay”),
and issued a promissory note (“Note 1”) to New Bay in the principal amount of $2 million with an interest rate of 7%
per annum, convertible into shares of Original Foxx Common Stock at $30.00 per share upon the listing of Original Foxx Common Stock through
an initial public offering. On December 21, 2023, Old Foxx issued into another securities purchase agreement (the “Convertible Note
Agreement 2”) with New Bay with the same terms and conditions as the Convertible Note Agreement, and issued another promissory note
(“Note 2”) to New Bay in the principal amount of $2 million.
In
connection with the Business Combination Agreement and all the transaction contemplated therein (the “Business Combination”),
in the spring of 2024, Old Foxx and ACAC reached out to New Bay to seek its interest in participating in further financing in connection
with the Business Combination.
After
negotiations with New Bay, On March 15, 2024, Old Foxx and New Bay agreed to an amendment to amend both Convertible Note Agreement
1 and Convertible Note Agreement 2, and to amend Note 1 and Note 2, by removing the lock-up provisions as provided therein and allowing
the unpaid principal and accrued interest on Note 1 and Note 2 to convert to Original Foxx Common Stock immediately prior to the closing of
the Business Combination. New Bay also subscribed for a new promissory note (“Note 3”) in the principal amount of $2 million
under the same terms and conditions as amended Note 1 and Note 2 (collectively, the “New Bay Notes”).
On
March 15, 2024, Old Foxx and New Bay amended the terms of the Note 1 and Note 2 accordingly and New Bay subscribed for a new promissory
note (“Note 3”) in the principal amount of $2 million under the same terms and conditions as amended Note 1 and Note
2 (collectively “New Bay Notes”).
On
February 20, 2024, New Bay introduced Old Foxx to BR Technologies PTE, Ltd. (“BR Technologies”), a Singapore-based company.
On May 30, 2024, Old Foxx, BR Technologies and Grazyna Plawinski Limited, a Singapore-based company (“Grazyna”),
entered into a securities purchase agreement for issuance of promissory notes in the amount of up to $9.0 million with an interest
rate of 7% per annum under the same terms and conditions as provided in the New Bay Notes. A promissory note was issued by Old Foxx to
BR (the “Note 4”) in the principal amount of $6 million and promissory notes issued by Old Foxx to Grazyna (the “Note
5”) in the total principal amount of $3 million on September 12, 2024.
Immediately prior to the Closing, all the accrued and unpaid principal
and interests on the New Bay Notes, Note 4, and Note 5 were converted into: (x) 212,050 shares of Original Foxx Common Stock for the New
Bay Notes, (y) 200,882 shares of Original Foxx Common Stock for Note 4, and (z) 100,690 share of Old Foxx Common Stock for Note 5, at
a price of $30.00 per share. At the Closing, all of the converted shares of Original Foxx Common Stock were cancelled in exchange for
the holders’ pro rata share of the Closing Payment Shares using the exchange ratio of 3.3033, resulting in (x) 700,473 shares of
our Common Stock issued to New Bay, (y) 663,581 shares of our Common Stock issued to BR Technologies, and (z) 332,614 shares of our Common
Stock issued to Grazyna.
Tariff and Customer Demand
Our sales decrease was primarily driven by lower order volumes. During the year ended June 30, 2026, tariffs imposed on imported goods, together with uncertainty regarding their scope and duration, resulted in significant volatility in our landed costs and selling prices. In response, certain customers deferred or reduced purchase commitments pending greater pricing clarity, which negatively affected order volumes and sales.
Product Costs and Pricing
A significant increase in memory chip prices increased our product costs during the year ended June 30, 2026. In response, we increased our selling prices in an effort to preserve gross margins. However, our customers did not accept the higher prices to the extent we anticipated, which contributed to lower order volumes and further reduced sales. Changes in product costs and our ability to adjust selling prices accordingly may continue to affect our gross margins and operating results.
Macroeconomic Conditions and Consumer Demand
Our operating results are also affected by broader macroeconomic conditions, including sustained inflation and its impact on consumer purchasing power. Inflation and reduced consumer purchasing power contributed to a longer mobile phone replacement cycle, which we believe has extended from approximately one to two years to more than two years. A longer replacement cycle may reduce consumer demand for mobile phones and related products and, consequently, adversely affect our sales and operating results.
One
of the key differentiating
factors of usours is the rich blended nature of our management team. Our management team comprises executives
with extensive sales, marketing,
and R&D experience in electronicstelecommunication industry withand IoTconsumer serviceselectronics related experiences.industry. The wide array of industry experience captured
by our management team allows us to deliver advanced technology and superior products to our customers. Losing any member of our key executive
executive team could significantly impact on the quality of services and products that we currently offer. Such departures may prompt customers
to explore alternative products or IoT cloud platforms offered by different vendors or service providers.
We
invest significant resources
in outsourcing partnerships and dedicatesdedicate efforts to research and develop new products, solutions, agent
platforms, and related services.
This commitment is essential to uphold our competitiveness in the industry, especially in the realm
of IoT services. Advancing technology
and enhancing capabilities are pivotal for enterprise growth, necessitating continual progress
in electronic product technologies, novel
services, and expanded capabilities.
In addition, in January 2026, we entered into a research and development agreement with a third-party service provider, pursuant to which the provider will render technical development services for the operating system used in our mobile phone products. Under the agreement, the provider will: (i) develop a customized cross-platform inheritance framework for the operating system to enable compatibility and adaptation across multiple platforms and operating systems; (ii) establish a unified compatibility and integration framework for system modules and applications in order to support overall system stability and interoperability; (iii) optimize core applications for multi-platform adaptation to improve system performance, operating smoothness, and user experience; (iv) develop proprietary applications, including a mobile manager, home screen, and browser, and integrate them into the operating system; (v) integrate and validate advertising and paid-service business modules to confirm their functionality, regulatory compliance, and security; and (vi) perform system and UX/UI design and implementation to improve visual design and user interaction and to maintain a consistent overall style. All intellectual property developed under the agreement will be owned by the Company.
Our
ability to expand our products and services
and diversifyingdiversify customer base
Currently,
our main revenue
stream originates from the sale of tablets and mobile phones. As brand recognition and acceptance grow, we anticipate
a surge in user
adoption of our wireless services and intelligenceintelligent products. Our capacity to broaden our products portfolio, offer new
services and attract
a more diversified customer base could significantly influence our future operating results.
Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $13.3 million, or 20.2%, to approximately $52.6 million for the year ended June 30, 2026 as compared to $65.9 million for the year ended June 30, 2025. The decrease of the total revenue was mainly attributable to the decreases in revenue across nearly all categories, which collectively accounted for 98% of our sales, with the exception of tablet products. The decrease was more pronounced in the second half of the year ended June 30, 2026, with approximately $9.7 million decrease occurring during the second half. The decline was primarily driven by the declined consumer demand and lower order value due to our intention of increasing selling prices in response to higher costs driven by rising chip prices, tariffs and related pricing uncertainty. The significant decline in sales in the second half of the year ended June 30, 2026 may continue to pressure our sales and gross margins in the near term if these conditions persist. We will continue to monitor customer demand, product costs, tariffs, and pricing conditions and adjust our strategies accordingly.
Our
revenue primarily derived from sales of electronic products. The total revenues increased by approximately $62.7 million, or
1,941.8%, to approximately $65.9 million for the year ended June 30, 2025 as compared to $3.2 million for the year ended June
30, 2024. The increase of the total revenue was mainly attributable to the sales from three new major wholesale customers who
aggregately accounted for 76% of our sales and launching of a new line of products, which is the wearable electronic products, and
new services.
Tablet product sales were
insignificant in our operations for the year ended June 30, 2026. Revenue
from the sales of tablettablets productsincreased by approximately $0.4 million,
or 82.6%, to approximately $0.9 million for the year ended June 30, 2026 from $0.5 million for the same period in 2025. Revenue from sales
of phones decreased by approximately $0.2$12.7 million, or 22.8%,21.2%, to approximately $0.5$47.0 million for the year ended June 30, 2026 from
$59.7 million for the same period in 2025 as the consumers’ spending power was weakened and the mobile phone replacement rate was
lowered. Previously, consumers tended to replace their phones every more often between 1 to 2 years, whereas now many keep the same device
for over 2 years. This decrease was also attributed to lower order volumes, resulting from our intention of increasing selling prices
in response to higher costs driven by rising chip prices. Revenue from sales of wearable products and others decreased by approximately
$0.4 million, or 11.5%, to approximately $3.0 million for the year ended June 30, 2026 from $3.4 million for the year ended June
30, 2025, as the consumers’ spending power was weakened and the demands of the wearable products were lowered during the year ended
June 30, 2026. Revenue from $0.7App service commission decreased by approximately $0.6 million, or 27.1%, to approximately $1.6 million
for the year ended June 30, 2024. Revenue2026 from sales of mobile phone products, which accounted for 91% of total revenue, increased by
approximately $57.1 million, or 2,224.9%, to approximately $59.7$2.2 million for the year ended June 30, 20252025, fromas $2.6 million for
the yearsales endedof Junephones 30, 2024, primarily because we rolled out some new phone products beginning in January 2024decreased and the salesconsumers’
spending topower ourwas two new major
wholesale customers accounted for 50% of our sales in aggregate.weakened. Revenue from salesother ofservices wearablewas productsincome generated by our other logistic and others,warehouse whichmanagement and MVNO
services and it was
new insignificant in our operations for the year ended June 30, 2025, increased by approximately $3.4 million, or 100.0%, to approximately $3.4 million for the
year ended June 30, 2025 from $0 for year ended June 30, 2024, as we rolled out some new wearable products beginning in October 2024.
Revenue from App service commission increased by approximately $2.2 million, or 100.0%, to approximately $2.2
million for the year ended June 30, 2025 from $0 for the year ended June 30, 2024, as we started to generate income by providing
installation of App service to our partners on our mobile devices2026 and procure the distribution of these devices to the end users
beginning in July 2024. Revenue from other services increased by approximately $0.1 million,
or 100.0%, to approximately $0.1 million for the year ended June 30, 2025 from $0 for the year ended June 30, 2024, as we started to generate
income by providing other logistic and warehouse management services in April 2025.
Our
cost of goods sold mainly consisted
consists of cost of merchandise and freight. Total cost of goods sold increaseddecreased by approximately
$58.0 $11.4 million, or 1,864.4%,18.7%, to approximately
$49.71 million for the year ended June 30, 2026 as compared to $61.1 million for the year ended June 30, 2025 as compared to $3.1 million
for the year ended June 30, 2024.2025. The increasedecrease in cost
of goods sold is a direct result of ana increasedecrease in our revenue, which is
consistent with the acquisitiondecrease in mobile phone production costs, which accounted
for 92% of our threecost newof majorgoods wholesale customers and new product line as discussed above for the year
ended June 30, 2025.sold.
Our
cost of goods sold for
tablets decreasedincreased by approximately $0.1$0.4 million, or 13.4%,73.5%, to approximately $0.4$0.8 million for the year ended June
30, 20252026 from $0.5approximately
$0.4 million for the same period in 2024.2025, consistent with the increase in sales of tablets. Cost of goods sold for mobile phone products increased
decreased by approximately $55.0$11.1 million,
or 2,110.3%,19.2%, to approximately $57.6$46.5 million for the year ended June 30, 20252026 from $2.6approximately
$57.6 million for the same period in 2024,2025, which
is consistent with the direct result of ana decrease in our revenue. The decrease is also
attributable to the decrease in unit cost as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025 offset
by the increase inof revenueinventory fromimpairment salesrelated to slow-moving inventory of mobileapproximately phone$5.8 products.million. Cost of goods sold for wearable
products and others increased by
approximately $3.0$0.6 million, or 100.0%,17.9%, to approximately $3.0$3.6 million for the year ended June 30, 2025
2026 from $0$3.0 for the same period
in 2024, which is also the direct result of an increase in our revenue as we rolled out some new wearable products beginning in October
2024. Cost of goods sold for other services increased by approximately $48,000, or 100.0% to approximately $48,000 for the year ended June 30, 2025 from
$0million for the same period in 2024,2025, which is alsoprimarily thedue directto resultinventory impairment related to slow-moving inventory of
approximately $1.0 million. Cost of another increaseservices was insignificant in our otheroperations revenue as we started to generate income
by providing other services duringfor the yearyears ended June 30, 2026 and 2025.
Our
gross profit increased decreased
by approximately $4.7$3.1 million, or 4,018.1%,64.6%, to approximately $4.8 million for the year ended June 30,
2025, from approximately $0.1$1.7 million for the year ended June 30, 2024.2026, from $4.8 million for
the year ended June 30, 2025.
For the years ended June 30, 2026 and 2025, our overall gross profit percentage was 3.2% and 7.2%, respectively. The decrease in gross profit percentage of 4.0% was primarily due to the decrease in gross profit percentage across nearly all categories, which collectively accounted for 90% of our gross profit, with the exception of tablet, attributable to inventory impairment, tariffs and related pricing uncertainty, and product costs. In addition, approximately 96.4% of the Company’s purchases were made from one major supplier, and changes in the supplier’s pricing and supply conditions may significantly affect the Company’s product costs and gross profit margin. The Company sought to increase selling prices to mitigate higher costs, but the customers did not accept the higher prices, limiting the Company’s ability to offset these cost increases.
For
the year ended June 30, 2025 and 2024, our overall gross profit percentage was 7.2% and 3.6%, respectively. The increase in gross
profit percentage of 3.7% was primarily due to the increases in gross profit percentage for mobile phone products, wearable products and
others and app service commission revenue and others.
Gross
profit percentage of
tablets droppedincreased from 23.5% to 14.1% fromfor the year ended June 30, 20242025 to 18.4 % for the same period in 2025.2026. This was primarily
due to the decrease of
in sales of those with higher unit selling prices and lower unit purchase prices.prices, and the reduction of shipping and tariff costs as we
negotiated with our vendor to cover such costs.
Gross
profit (loss) percentage for
mobile phones increaseddecreased from (1.5)% to 3.5% for the year ended June 30, 2024,2025 to 1.0% for the same period in
2025. 2026. This was primarily due to the
inventory increasingimpairment salesrelated to slow-moving inventory of newapproximately phone$5.8 models with higher gross profit margins.million.
Gross (loss) profit percentage for wearable products and others decreased from 11.7% for the year ended Juen 30, 2025 to (17.6) % for the same period in 2026. This was primarily due to the increasing sales of products with lower gross profit margins and the inventory impairment related to slow-moving inventory of approximately $1.0 million.
For
the year ended June 30, 2025, our gross profit percentage of wearable products was 11.7%. We did not have this kind of products for the
year ended June 30, 2024.
For
the yearyears ended June
30, 30,2026 and 2025, our gross profit percentage of App service commission and others was 100.0%. This high margin was primarily
attributable to the
nature of App service commission revenue, which was commission based revenue that was earned at a point in time when
the revenue is generated
from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional Apps
occur at a point in time
when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service
commission) from our partners
without incurring any direct cost, as the pre-installation expenses were included in the research and development
expenses prior to installation,
and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue. We did
not have this kind of service for the year ended June 30, 2024.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Provision of credit losses”
New heading “Provision of credit losses”
New heading “Allowance for Credit Losses”
New heading “Impairment of long-lived assets”
Removed heading “Merger Consideration”
Largest changes
Our cost of goods sold for tabletssee in full comparisonincreaseddecreased by approximately$0.1 million,$21,000, or89.0%,12.0%, to approximately$0.2 million$154,000 for the three months endedDecemberMarch 31,20252026 from$0.1 millionapproximately $175,000 for the same period in2024.2025. Cost of goods sold for mobile phone products increased by approximately $0.3 million, or 3.2%, to approximately $9.4 million for thesixthree months endedDecemberMarch 31,20252026wasfrom approximately$13.6$9.1million,millionunchanged fromfor the same period in2024,2025,asprimarily duewetonegotiatedinventory impairment related to slow-moving inventory of approximately $2.6 million, and the increased chip prices. Cost of goods sold for wearable products and others decreased by approximately $0.8 million, or 60.6%, to approximately $0.6 million for the three months ended March 31, 2026 from $1.4 million for the same period in 2025, which is consistent with the decrease of sales and is the direct result of our negotiation with our vendor to cover shipping and tariff costs beginning in July 2025. Cost ofgoods sold for wearable products and others decreased by approximately $0.9 million, or 59.0%, to approximately $0.6 million for the three months ended December 31, 2025 from $1.5 million for the same period in 2024, which is the direct result of our negotiation with our vendor to cover shipping and tariff costs beginning in July 2025. Cost ofother services was insignificant in our operations for the three months endedDecemberMarch 31, 2026 and 2025.
“The impairment of long-lived assets is reviewed on an annual basis and whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. During the period, management identified certain impairment indicators for right-of-use assets, including a current period loss, a history of losses, and management’s decision to sublease our warehouse. These factors required management to assess whether the carrying value of the asset group was recoverable. …”see in full comparison
“Net cash provided by operating activities was approximately $1.3 million for the nine months ended March 31, 2026 and was primarily attributable to (i) non-cash expenses of approximately $34.9 million, which includes depreciation, amortization of operating right-of-use assets, stock-based compensation, impairment of inventories, impairments of right-of-use assets, and provision of credit losses, net, (ii) approximately $6.1 million increase in accounts payable – supplier financing due to increased purchases for dropship orders, (iii) approximately $1.4 million decrease in accounts …”see in full comparison
“Net cash used in operating activities was approximately $93,000 for the six months ended December 31, 2025 and was primarily attributable to (i) approximately $7.2 million net loss, (ii) approximately $0.8 million payment in operating lease liabilities as we commenced our factory and warehouse lease in July 2025, (iii) approximately $0.6 million decrease in other payables and accrued liabilities as we committed to repaying supply chain finance interests, and (iv) approximately $0.2 million decrease in other payable – related parties primarily due to the repayment of unconverted working …”see in full comparison
On November 5, 2025, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, for a period of 30 consecutive business days, our market value of listed securities (“MVLS”) closed below the $35,000,000 MVLS threshold required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have until May 4, 2026 to regain compliance with the MVLS requirement (the “Initial Compliance Period”).see in full comparisonToForregainthecompliance,last 15 consecutive business days, from March 31 through April 21, 2026, our MVLS hasmustbeenclose at $35 million$35,000,000 ormoregreater.for a minimum of ten consecutive business days during the Initial Compliance Period. IfAccordingly, wedohavenot regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel. We intend to actively monitor our minimum market value of our listed securities and may, if appropriate, consider implementing available options to regainregained compliance with theMVLSRule,requirement.andTherethiscanmatterbeisnonowassurance that we will be able to regain compliance with Nasdaq Listing Rule 5550(b)(2), or maintain compliance with any other listing requirements.closed.
Full comparison: every changed paragraph (87)
Beginning
in 2023, we adjusted
our business strategy to avoid reliance on limited suppliers and customers and to diversify suppliers and customers
to mitigate the concentration
and reliance risk. We have added new product models across each product line to target a broader range
of customers. As of the date hereof,
we have reached out to a total of eightsixteen wholesale customers to expand our operations in the market
and expect to secure purchase orders
from these new customers. At the same time, to meet the various product demands of current and prospective
customers, we have connected
with suppliers who can provide manufacturing support when we secure purchase orders from our customers.
In addition, we plan to further
expand our product range and to launch an IoT platform to manage all end products sold and began setting
up a service team for our business
to business (B2B) model in the artificial IoT department. Through the efforts to expand product range
and reaching a broader customer
base, we will be able to move away from relying on limited customers and suppliers. As we dedicated our
resources to expansion, we experienced
a significant decrease in the sales of tablet and mobile phone products during the year ended
June 30, 2024 as compared to the same period
in 2023: (i) new customers began orders in much smaller quantities as compared to our
previous customer in order to build up a trustworthy
relationship; (ii) similarly and relevantly, we placed order with new suppliers
in much smaller quantities to build up relationship
and ensure the quality of the products; and (iii) new product models on both
tablet and mobile phones order by new customers required
approximately 6-9 months from development to mass production.
During the nine months ended March 31, 2026, we revised our business strategy and decided to exit the AIoT business. Accordingly, in December 2025, we completed the sales of our AIoT products and disposed of related AIoT equipment. In addition, in January 2026, we began engaging in dropship arrangement to reduce additional freight cost and usage of our warehouse spaces. This change of business strategy helped us to reduce our freight costs and promoted better gross margin with our wholesales business For the nine months ended March 31, 2026, our sales decreased compared to the nine months ended March 31, 2025. The inflation rate was steadily increasing throughout 2024 and 2025, the consumers’ spending power was weakened, and the mobile phone replacement rate was lowered. Previously, consumers tended to replace their phones every more often between 1 to 2 years, whereas now many keep the same device for over 2 years. In addition, lower order volumes, resulting from our intention of increasing selling prices in response to higher costs driven by rising chip prices, contributed to the decline in sales. Our sales strategy did not execute smoothly as our customers did not respond well with the increase of selling prices which lead to the revenue decreased.
During the six months ended December 31, 2025, we revised our business
strategy and decided to exit the AIoT business. Accordingly, in December 2025, we completed the sales of our AIoT products and disposed
of related AIoT equipment.
For the six months ended
December 31, 2025, our sales remained consistent with our historical level, as we retained our two major customers and continued to sell
our new products and services during the period.
These transactions were completed in connection with the consummation of the Business Combination: (i) all 2,270,096 ACAC outstanding shares were converted on a one-for-one basis into our Common Stock; (ii) all issued and outstanding shares of Old Foxx Common Stock were cancelled in exchange for the rights for Old Foxx Shareholders, including the holders of Old Foxx’s convertible promissory notes upon the conversion of the convertible promissory notes and their interests into Old Foxx Common Stock immediately prior to Closing, to receive such stockholder’s pro rata share of 5,000,000 shares of our Common Stock were cancelled in exchange for the right by the Old Foxx Shareholders to receive a pro rata share of 3,303,333 shares of our Common Stock at the exchange ratio of 3.3033; (iii) 4,200,000 shares (“Earnout Shares”) of our Common Stock were reserved for issuance to Old Foxx’s stockholders subject to the vesting schedule based on our financial performance for the fiscal years ended June 30, 2025 and 2024. The Earnout Shares were forfeited since we did not meet the financial performance threshold; (iv) all issued and outstanding 12,156,417 ACAC warrants were converted on a one-for-one basis into our warrants.
Merger Consideration
Immediately prior to the
effective time of the Reincorporation Merger (the “Reincorporation Merger Effective Time”), which was on September 25, 2024,
one business day prior to the Closing, (i) each issued and outstanding ACAC unit was automatically separated into one (1) share of ACAC
Class A common stock and one-half (1/2) of one ACAC warrant, and (ii) each share of ACAC Class A common stock held by ACAC stockholders
who validly redeemed their shares of ACAC Class A common stock (each “ACAC Redeeming Share”) was automatically cancelled and
ceased to exist and thereafter represented only the right to be paid a pro-rata redemption price.
Upon Closing, we were renamed
as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.” (i.e. the Subsidiary).
Pursuant to the Business
Combination Agreement, 500,000 shares of the Closing Payment Stock in aggregate were deposited (the “Escrow Arrangement”)
to a segregated escrow account and would be released to the Old Foxx Stockholders if and only if, prior to or upon the one-year anniversary
of the Business Combination Agreement, the Affordable Connectivity Program (ACP) managed by the U.S. Federal Communication Commission
is reauthorized by the U.S. Congress with funding of no less than $4 billion in total for such reauthorized period; or otherwise
be cancelled and forfeited by the Registrant without consideration.
Additionally, the Old Foxx
Stockholders would be entitled to receive “Earnout Shares”, which refer to 4,200,000 shares of our Common Stock, subject to
the vesting schedule (the “Vesting Schedule”) as follows:
provided, however, that the
Earnout Shares would be issued and delivered pursuant to one paragraph from (i)(A)-(i)(C) above only once; and
provided, however, that the
Earnout Shares would be issued and delivered pursuant to one paragraph from (ii)(A) to (ii)(C) above only once.
On October 24, 2024, upon
the filing of the 2024 Audited Financial Statements as part of the Annual Report of the Company on Form 10-K filed with the SEC (the “2024
10-K”), any Earnout Shares that the Old Foxx Shareholders would be entitled to receive under the Vesting Schedule were automatically
forfeited, as the Company did not meet any of the vesting conditions for the fiscal year ended June 30, 2024 within the Vesting Schedule.
In addition, on October 15,
2025, upon the filing of the 2025 Audited Financial Statements as part of the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2025 filed with the SEC (the “2025 10-K”), any Earnout Shares that the Old Foxx Shareholders would be
entitled to receive under the Vesting Schedule were automatically forfeited, as the Company did not meet any of the vesting conditions
for the fiscal year ended June 30, 2025 within the Vesting Schedule.
In addition to the foregoing,
pursuant to that certain amendment to the Underwriting Agreement, by and between EF Hutton LLC and ACAC, dated February 20, 2024, 43,125
shares of our Common Stock were issued to EF Hutton LLC at the Closing.
On November 5, 2025, we received
a deficiency letter from the Nasdaq
Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”)
notifying us that, for
a period of 30 consecutive business days, our market value of listed securities (“MVLS”) closed below
the $35,000,000 MVLS
threshold required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS
Rule”).
In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have until May 4, 2026 to regain compliance with the MVLS requirement
(the “Initial
Compliance Period”). ToFor regainthe compliance,last 15 consecutive business days, from March 31 through April 21, 2026, our MVLS
has mustbeen close at $35 million$35,000,000 or moregreater. for a minimum of ten consecutive business
days during the Initial Compliance Period. IfAccordingly, we dohave not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will
provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination
to a hearings panel. We intend to actively monitor our minimum market value of our listed securities and may, if appropriate, consider
implementing available options to regainregained compliance with the MVLSRule, requirement.and Therethis canmatter beis nonow assurance that we will be able to regain
compliance with Nasdaq Listing Rule 5550(b)(2), or maintain compliance with any other listing requirements.closed.
One
of the key differentiating
factors of usours is the rich blended nature of our management team. Our management team comprises executives
with extensive experience in
electronics industry with IoT services related experience. The wide array of industry experience captured
by our management team allows
us to deliver advanced technology and superior products to our customers. Losing any member of our key
executive team could significantly
impact on the quality of services and products that we currently offer. Such departures may prompt
customers to explore alternative products
or IoT cloud platforms offered by different vendors or service providers.
In addition, in January 2026, we entered into a R&D agreement with a third party, pursuant to which the third party will provide the Company technical development services for the operating system of the Company’s mobile phone products, including developing a customized FOXX OS cross-platform inheritance framework to enable compatibility and adaptation across multiple platforms and operating systems; establishing a unified compatibility and integration framework for system modules and applications to ensure overall system stability and interoperability; optimizing core applications for multi-platform adaptation to enhance system performance, smooth operation, and user experience; developing proprietary applications, including a mobile manager, home screen, and browser, and complete their integration into the operating system; integrating and validating advertising and paid-service-related business modules to ensure proper functionality, regulatory compliance, and security; and conducting system and UX/UI design and implementation to enhance visual design and user interaction, ensuring a consistent overall style.
Comparison
for the three months ended December
March 31, 20252026 and 20242025
Our
revenue is primarily
derived from sales of electronic products. The total revenues decreased by approximately $0.8$2.7 million, or 4.4%, 23.9%,
to approximately
$16.7 $8.7 million for the three months ended DecemberMarch 31, 20252026 as compared to $17.5$11.4 million for the three months ended December
March 31, 2024.
2025. The decrease of the total revenue was mainly attributable to the decrease in mobile phone products and wearable and other
products revenues and service revenues.
Tablet
product sales were
insignificant in our operations for the three months ended DecemberMarch 31, 2025.2026. Revenue from the sales of tablets increased decreased
by approximately
$0.1 million, or 65.6%,62.1%, to approximately $0.3$0.1 million for the three months ended DecemberMarch 31, 20252026 from $0.2 million for
the same period
in 2024.2025. Revenue from sales of phones slightly increaseddecreased by approximately $0.4$0.9 million, or 2.5%,9.8%, to approximately $15.2$8.0 million
for for
the three months ended DecemberMarch 31, 20252026 from $14.8$8.9 million for the same period in 2024.2025. This decrease was primarily attributed to lower
order volumes resulting from our intention of increasing selling prices in response to higher costs driven by rising chip prices. Our
sales strategy did not execute smoothly as our customers did not respond well with the increase of selling prices which lead to the phones
revenue decreased. Revenue from sales of wearable products and others
decreased by approximately $1.1$1.3 million, or 63.8%,83.7%, to approximately $0.6
$0.3 million for the three months ended DecemberMarch 31, 20252026 from
$1.8 $1.6 million for the three months ended DecemberMarch 31, 2024,2025, as the consumers’
spending power was weakened and the demands of the
wearable products rate waswere lowered during the three months ended DecemberMarch 31, 20252026 period.
Revenue from App service commission decreased
by approximately $0.1$0.4 million, or 14.8%,53.0%, to approximately $0.3 million for the three
months ended March 31, 2026 from approximately $0.7 million for the three months ended DecemberMarch 31, 20252025, from approximately
$0.6 million foras the threesales monthsof endedphones December 31, 2024, asdecreased
and the consumers’ spending power was weakened. Revenue from other services
were was income generated by our other logistic and warehouse
management and MVNO services and it was insignificant in our operations for
the three months ended DecemberMarch 31, 2025.2026.
Our
cost of goods sold mainly
consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $0.8$0.6 million,
or 5.2%,5.7%, to approximately
$14.5 $10.1 million for the three months ended DecemberMarch 31, 20252026 as compared to approximately $15.3$10.7 million for
the three months ended
December March 31, 2024.2025. The decrease in cost of goods sold is a direct result of a decrease in our revenue, consistent with the decrease in
wearable and other production costs.revenue. The decrease
is also attributable to the decrease in cost of mobile phone products as we negotiated
with our vendor to cover shipping and tariff costs beginning
in July 2025.
Our cost of goods sold for
tablets increaseddecreased by approximately $0.1
million,$21,000, or 89.0%,12.0%, to approximately $0.2 million$154,000 for the three months ended DecemberMarch 31, 20252026 from $0.1 millionapproximately
$175,000 for the same period in
2024. 2025. Cost of goods sold for mobile phone products increased by approximately $0.3 million, or 3.2%, to
approximately $9.4 million for the sixthree months ended DecemberMarch 31, 20252026 wasfrom approximately $13.6$9.1 million,million unchanged
fromfor the same period in 2024,2025, asprimarily
due weto negotiatedinventory impairment related to slow-moving inventory of approximately $2.6 million, and the increased chip prices.
Cost of goods sold for wearable products and others decreased by approximately $0.8 million, or 60.6%, to approximately $0.6 million
for the three months ended March 31, 2026 from $1.4 million for the same period in 2025, which is consistent with the decrease of sales
and is the direct result of our negotiation with our vendor to cover shipping and tariff costs beginning in July 2025. Cost of goods
sold for wearable products and others decreased by approximately $0.9 million, or 59.0%, to approximately $0.6 million for the three
months ended December 31, 2025 from $1.5 million for the same period in 2024, which is the direct result of our negotiation with our vendor
to cover shipping and tariff costs beginning in July 2025. Cost of other services
was insignificant in our operations for the three months
ended DecemberMarch 31, 2026 and 2025.
Gross (Loss) Profit
Our
gross gross(loss) profit increased
decreased by approximately $26,000,$2.1 million, or 1.2%,318.7%, to approximately $2.2$1.5 million gross loss for the three months
ended March 31, 2026, from $0.7 gross profit for the three months ended DecemberMarch 31, 2025, from $2.2 for the
three months ended December 31, 2024.2025.
Our
gross gross(loss) profit from their
major revenue categories is summarized as follows:
For
the three months ended
December March 31, 20252026 and 2024,2025, our overall gross (loss) profit percentage was 13.3%(16.7) % and 12.5%,5.8%, respectively. The increase decrease
in gross (loss) profit percentage
of 1.2%22.6% was primarily due to the increasedecrease in gross profit percentage for mobileall phone products, which accounted for 72% of our gross profit.products.
Gross (loss) profit percentage
of of
tablets decreased from 21.1%20.2% for the three months ended DecemberMarch 31, 20242025 to 9.9%(85.0) % for the same period in 2025.2026. This was primarily
due due
to the decrease of sales of those with higher unit selling prices and lower unit purchase prices, as well as inventory impairment
related related
to slow-moving inventory.inventory of approximately $99,000.
Gross profit percentage for
mobile phones increased from 8.2% for the three months ended December 31, 2024 to 10.4% for the same period in 2025. This was primarily
due to the increasing sales in new phone models with higher gross profit margins with the reduction of shipping and tariff costs
as we negotiated with our vendor to cover such costs.
Gross profit
loss percentage for
wearable productsmobile andphones others decreasedincreased from 13.9%2.8% for the three months ended DecemberMarch 31, 20242025 to 2.5%17.5% for the same period in 2025.2026.
This This
was primarily due to inventory impairment related to slow-moving inventory.inventory and increased chip prices without a corresponding
increase in selling prices.
Gross (loss) profit percentage for wearable products and others decreased from 9.2% for the three months ended March 31, 2025 to (119.4) % for the same period in 2026. This was primarily due to inventory impairment related to slow-moving inventory of approximately $0.4 million.
For
the three months ended
December March 31, 20252026 and 2024,2025, our gross profit percentage of App service commission was 100.0%. This high margin was
primarily attributable
to the nature of App service commission revenue, which was commission based revenue that was earned at a point
in time when the revenue
is generated from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional
Apps occur at a
point in time when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service
commission)
from our partners without incurring any direct cost, as the pre-installation expenses were included in the research and development
expenses expenses
prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.
For the three months endedGross
December 31, 2025, our gross profit percentage offor other services wasincreased 36.9%.from We did not have other logistics and warehouse management and
MVNO services62.6% for the three months ended DecemberMarch 31, 2024.2025 to 98.0% for the same period in 2026.
Gross profit for other services was insignificant in our operations for the three months ended March 31, 2026 and 2025.
Total
operating expenses
increased by approximately $8,000,$1.2 million, or 0.2%,28.3%, to approximately $4.4$5.4 million for the three months ended December March
31, 2025,2026, from approximately
$4.4 $4.2 million for the three months ended DecemberMarch 31, 2024.2025.
Selling
expenses decreased
approximately $0.5$0.6 million, or 29.8%,37.8%, to approximately $1.1$0.1 million for the three months ended DecemberMarch 31, 2025, 2026,
from approximately
$1.6 million for the three months ended DecemberMarch 31, 2024.2025. The decreased selling expenses was mainly attributable
to approximately
$0.3 million decrease in payroll and payroll related expenses, approximately $0.3$0.2 million decrease in marketing consulting
fees, and approximately
$0.1 million decrease in testing and certification expenses during the three months ended December 31, 2025,
as we reduced salespersons
and consultants and the test for products to cut expenses and improve profitability to improve cost efficiency. The decrease was offset
by approximately $0.1 million increase in stock-based compensation as we granted restricted stock units in November 2024 to ourstreamline sales
team members under employee incentive plan and approximately $0.1 million increase in advertising and marketing expenses primarily due
to the increased marketing investment in e-commerce channels.department.
General and administrative
expenses increased approximately $1.1$1.5 million,
or 52.0%,106.0%, to approximately $3.1$2.9 million for the three months ended DecemberMarch 31, 2025
2026 from approximately $2.0$1.4 million for the three
months ended DecemberMarch 31, 2024.2025. The increased general and administrative expense were
mainly attributable to the approximately $0.2 million increase in professional expense on audit and accounting fees as we became a public
company and incurred additional capital market and legal consulting fees, approximately $0.1 million increase in salary and wages
as a result of allocating certain personnel compensation from selling expenses to general and administrative
expenses, reflecting a change
in the personnel’s primary responsibilities, approximately $0.1 million increase in provision for credit losses due to continued
aging of receivables, and approximately $0.7$1.3 million increase in rent due to
the new factory and warehouse leaseleases that commenced in July
2025. 2025 and January 2026.
Research
and development
(“R&D”) expenses from a related party decreased by approximately $46,000,$23,000, or 100.0%, where the decrease
was primarily
due to an R&D project which commenced in 2024 and was completed in June 2025. During the three months ended DecemberMarch 31, 2024,
2025, a related
party completed additional 20% of the remaining 5G development project pursuant to aan R&D agreement between us and
the related party,
and we recognized a R&D expense approximately of $46,000$23,000 accordingly based on the progression of the R&D project.
We did not have
this expense for the same period in 2025.2026.
R&D
expenses expenses
decreasedincreased by approximately $0.5$0.3 million, or 73.1%,31.3%, from $0.7$0.8 million for the three months ended DecemberMarch 31, 20242025 to $0.2$1.1 million
for the same period in 2025.2026. The decreaseincrease was primarily due to the reductionR&D ofagreement headcountsentered and departmental expenses as we scaled
back activitiesinto in January 2026 with a third party,
under which the third party will provide technical development services for our operating system across three phases. During the three
months ended March 31, 2026, the Company recognized approximately $0.9 million of R&D department.expenses under this agreement, reflecting progress
in the initial development phase.
Provision of credit losses
Provision of credit losses increased by approximately $1.3 million, or 318.3%, from $0.4 million for the three months ended March 31, 2025 to approximately $1.7 million for the same period in 2026. The increase was primarily due to continued aging of receivables, as well as our assessment of historical collection experience and probability of recovery from our customers and customer groups.
Impairments of right-of-use assets increased by approximately $25.9 million, or 100.0%, from $0 for the three months ended March 31, 2025 to approximately $25.2 million for the same period in 2026. The increase was primarily attributable to impairment charges recognized following the change in our business strategy because we began engaging in dropship arrangement in our wholesale business and we are no longer required to use our warehouse space. As a result, our management decided to sublease our warehouse with lesser value as compared to our current lease payments, which indicated that the carrying amount of the right-of-use assets was not recoverable and exceeded their estimated fair value by approximately $25.9 million.
Other (expense) income,
expense, net
Our
other (expense)expense, income,
net is summarized as follows:
Total other (expense)expense, income,
net decreasedincreased by approximately $5.7$1.8 million, or 156.3%,
339.9%, to approximately $2.1$2.3 million of other expense, net for the three months ended
December March 31, 2025,2026, from approximately $3.7$0.5 million of other income, net
for the three months ended DecemberMarch 31, 2024.2025. The decreaseincrease was
primarily due to the increase of approximately $1.0$0.8 million interest expenses
incurred related to the financing offered by our vendors
based upon the timing of our payment to their accounts payable – supplier
financing and the decrease of approximately $4.7$1.0 million change in fair value of
earnout liabilities as we no longer had earnout liabilities
after June 30, 2025.
TheThere
was no provision for income
taxes was $0 forin each of the three months ended DecemberMarch 31, 20252026 and 20242025 as we had made full allowance of our deferred
tax assets on
net operating losses.
Net (
loss) income
Net (loss) incomeincreased decreased
by approximately $5.7
$32.2 million, or 400.9%,788.0%, to approximately $4.3$36.3 million of net loss for the three months ended DecemberMarch 31, 2025,
2026, from approximately $1.4$4.1 million of net income
for the three months ended DecemberMarch 31, 2024.2025. Such change was mainly due to the reasons
discussed above.
Changes
in foreign currency
translation adjustment of approximately $2,000$3,000 are mainly due to the fluctuation of foreign exchange rates between
SGD (the functional
currency of one of our subsidiaries) and the USD dollar (reporting currency) for the three months ended DecemberMarch 31, 2025.
2026.
Comparison
for the sixnine months ended December
March 31, 20252026 and 20242025
Our
revenue is primarily
derived from sales of electronic products. The total revenues decreased by approximately $3.7$6.4 million, or 9.0%, 12.3%,
to approximately
$36.9 $45.6 million for the sixnine months ended DecemberMarch 31, 20252026 as compared to $40.6$52.0 million for the sixnine months ended December March
31, 2024.
2025. The decrease of the total revenue was mainly attributable to the decrease in mobile phone products revenues, which accounted
for 89%90% of
our sales.
Tablet
product sales were
insignificant in our operations for the sixnine months ended DecemberMarch 31, 2025.2026. Revenue from the sales of tablets increased
by approximately
$0.1 million,$19,000, or 90.2%,5.1%, to approximately $0.3 million$412,000 for the sixnine months ended DecemberMarch 31, 20252026 from $0.1 million$393,000 for the same period
in 2024.2025. Revenue from sales of phones decreased by approximately $4.8$5.7 million, or 12.9%,12.2%, to approximately $32.9$40.9 million for the
nine six
months ended DecemberMarch 31, 20252026 from $37.7$46.6 million for the same period in 20242025 as the consumers’ spending power was weakened and
the mobile phone replacement rate was lowered. Previously, consumers tended to replace their phones every sixmore months,often between 1 to 2 years,
whereas now many
keep the same device for over a2 year.years. This decrease was also attributed to lower order volumes, resulting from our
intention of increasing selling prices in response to higher costs driven by rising chip prices. Revenue from sales of wearable products
and others increaseddecreased by approximately $1.0$0.4 million,
or 54.2%,10.7%, to approximately $2.7$3.0 million for the sixnine months ended DecemberMarch 31, 2025
2026 from $1.7$3.4 million for the sixnine months ended December
March 31, 2024,2025, primarily due toas the rolloutconsumers’ spending power was weakened and the demands
of newthe wearable products beginningwere in October 2024, which resulted in only three months of sales
recognizedlowered during the sixnine months ended DecemberMarch 31, 2024.2026 period. Revenue from App service commission increased decreased
by approximately $0.1$0.3 million,
or 8.1%,18.2%, to approximately $1.0$1.3 million for the sixnine months ended DecemberMarch 31, 20252026 from $0.9$1.6 million
for the sixnine months ended December
March 31, 2024,2025, as wethe engaged more partners and generate more income by providing installationsales of Appphones service to our partners on our mobile
devices and procuredecreased the distributionconsumers’ ofspending thesepower deviceswas to the end users.weakened. Revenue
from other services was income generated by our other
logistic and warehouse management and MVNO services and it was insignificant in
our operations for the sixnine months ended DecemberMarch 31, 2025.2026.
Our
cost of goods sold mainly
consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $6.0$6.6 million,
or 15.9%,13.6%, to approximately
$32.0 $42.1 million for the sixnine months ended DecemberMarch 31, 20252026 as compared to $38.0$48.7 million for the sixnine months
ended DecemberMarch 31, 2024.
2025. The decrease in cost of goods sold is a direct result of a decrease in our revenue, consistent with the decrease
in mobile phone production
costs, which accounted for 91% of our cost of goods sold.
Our cost of goods sold for
tablets increased by approximately $0.2$0.1 million, or 111.8%,42.4%, to approximately $0.3$0.4 million for the sixnine months ended DecemberMarch 31, 20252026 from
$0.1approximately $0.3 million for the same period in 2024.2025. Cost of goods sold for mobile phone products decreased by approximately $7.3$7.1 million,
or or
20.2%,15.5%, to approximately $29.0$38.4 million for the sixnine months ended DecemberMarch 31, 20252026 from $36.3approximately $45.5 million for the same period
in 2024,2025, which is
consistent with the direct result of an decrease in our revenue. The decrease is also attributable to the decrease in
unit cost as we
negotiated with our vendor to cover shipping and tariff costs beginning in July 2025.2025 offset by the increase of inventory
impairment related to slow-moving inventory of approximately $3.7 million. Cost of goods sold for wearable products and others increased
increased by approximately $1.2$0.4 million, or 76.4%,10.6%, to approximately $2.7$3.3 million for the sixnine months ended DecemberMarch 31, 20252026 from
$1.5 $2.9 million
for the same period in 2024,2025, which is alsoprimarily thedue directto resultinventory impairment related to slow-moving inventory of anapproximately increase$0.8 in our revenue as we rolled out some new wearablemillion.
products beginning in October 2024. Cost of other services was insignificant in our operations for the sixnine months ended DecemberMarch 31, 2026 and 2025.
Our
gross profit increased
by approximately $2.4$0.2 million, or 91.6%,8.0%, to approximately $5.0$3.5 million for the sixnine months ended December March
31, 2025,2026, from $2.6
$3.3 for the sixnine months ended DecemberMarch 31, 2024.2025.
For
the sixnine months ended
December March 31, 20252026 and 2024,2025, our overall gross profit percentage was 13.4%7.7% and 6.4%,6.3%, respectively. The increase in gross
profit percentage
of 7.0%1.4% was primarily due to the increase in gross profit percentage for mobile phone products, which accounted for 78%
71% of our gross profit.
Gross (loss) profit percentage
of of
tablets decreased from 20.5%20.4% for the sixnine months ended DecemberMarch 31, 20242025 to 11.5%(8.0) % for the same period in 2025.2026. This was primarily due
to to
the inventory impairment related to slow-moving inventory.inventory of approximately $0.1 million.
Gross profit percentage for
mobile phones increased from 3.7%2.4% for the sixnine months ended DecemberMarch 31, 20242025 to 11.8%6.1% for the same period in 2025.2026. This was primarily due
due to the increasing sales of new phone models with higher gross profit margins and the reduction of shipping and tariff costs as we
we negotiated with our vendor to cover such costs. The increase was offset by the inventory impairment related to slow-moving inventory of
approximately $3.7 million.
Gross (loss) profit percentage
for for
wearable products and others decreased from 13.9%12.2% for the sixnine months ended DecemberMarch 31, 20242025 to 1.5%(8.8) % for the same period in 2025.2026.
This This
was primarily due to the increasing sales inof products with lower gross profit margins and the inventory impairment related to
slow-moving slow-moving
inventory.inventory of approximately $0.8 million.
For
the sixnine months ended
December March 31, 20252026 and 2024,2025, our gross profit percentage of App service commission was 100.0%. This high margin was
primarily attributable
to the nature of App service commission revenue, which was commission based revenue that was earned at a point
in time when the revenue
is generated from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional
Apps occur at a
point in time when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service
commission)
from our partners without incurring any direct cost, as the pre-installation expenses were included in the research and development
expenses expenses
prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.
ForGross
profit percentage for other services increased from 62.6% for the sixnine months ended
December March 31, 2025,2025 ourto gross88.2% for the same period in 2026.
Gross profit percentage offor other services was 76.96%.insignificant Wein didour not have other logistic and warehouse management and
MVNO servicesoperations for the sixnine months ended DecemberMarch 31, 2024.2026 and 2025.
FOXX insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 1,943 shares, about $11.9K). Net open-market shares: -1,943 (purchases minus sales); net value about -$11.9K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-05 | Cui Haitao |
Shares withheld for tax | 2,722 | $2.65 | $7.2K |
| 2026-06-04 | Liao James |
Open-market sale | 1,943 | $6.15 | $11.9K |
| 2026-05-05 | Cui Haitao |
Shares withheld for tax | 1,945 | $4.76 | $9.3K |
Well-known investors holding FOXX (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 15,630 | $51.1K | 0.0% | Reduced 47% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 71,200 | $6.2K | — | Sold out |