Foxx Development Holdings Inc. - Interim / Quarterly Report 2026

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _to _

Commission File Number 001-42285

Foxx Development Holdings Inc.

(Exact name of registrant as specified in its charter)

Delaware	99-5119494
(State or other jurisdiction
of Incorporation or organization)	(IRS Employer Identification No.)

15375 Barranca Parkway C106

Irvine , CA 92618

(Address of principal executive offices)

+201 - 962-5550

(Issuer’s telephone number including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

| Title
of each class | Trading
Symbol | Name
of each exchange on which registered |
| --- | --- | --- |
| Common Stock, par value $0.0001 per share | FOXX | The Nasdaq Stock Market LLC |
| Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 | FOXXW | The Nasdaq Stock Market LLC |

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

| Large accelerated
filer ☐ | Accelerated
filer ☐ |
| --- | --- |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| | Emerging growth company ☒ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date. As of May 11, 2026, there are 7,041,192 shares of common stock issued and outstanding.

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FOXX DEVELOPMENT HOLDINGS INC.

CONTENTS

| PART
1 – FINANCIAL INFORMATION | 1 |
| --- | --- |
| Item
1. – Financial Statements (unaudited) | 1 |
| Condensed
Consolidated Balance Sheets | 1 |
| Condensed
Consolidated Statements of Operations and Comprehensive Loss | 2 |
| Condensed
Consolidated Statements of Stockholders’ Equity (Deficit) | 3 |
| Condensed
Consolidated Statements of Cash Flows | 4 |
| Notes
to Condensed Consolidated Financial Statements | 5 |
| Item
2. – Management’s Discussion and Analysis of Financial Condition And Results of Operations | 29 |
| Item
3. – Quantitative and Qualitative Disclosures about Market Risk | 45 |
| Item
4. – Controls and Procedures | 45 |
| PART
II – OTHER INFORMATION | 46 |
| Item
1. – Legal Proceedings | 46 |
| Item
1A. – Risk Factors | 46 |
| Item
2. – Unregistered Sales of Equity Securities and Use of Proceeds | 46 |
| Item
3. – Defaults Upon Senior Securities | 46 |
| Item
4. – Mine Safety Disclosures | 46 |
| Item
5. – Other Information | 46 |
| Item
6. – Exhibits | 46 |
| SIGNATURES | 47 |

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PART I: FINANCIAL INFORMATION

Item 1. - Financial Statements

FOXX DEVELOPMENT HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, — 2026	2025
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$ 3,190,474	$	1,875,453
Accounts receivable, net of allowance for credit losses of $ 1,848,648 and $ 595,907 , as of March 31, 2026 and June 30, 2025, respectively	4,112,151		6,786,792
Inventories	6,965,109		12,686,739
Contract assets	41,724		454,842
Prepaid expenses and other receivables, net of allowance for credit losses of $ 829,681 and $ 317,282 , as of March 31, 2026 and June 30, 2025, respectively	689,913		1,837,812
Prepaid expenses - related party	-		8,000
Amount due from related parties - current	28,720		-
Total Current Assets	15,028,091		23,649,638
PROPERTY AND EQUIPMENT, NET	90,934		131,722
NON-CURRENT ASSETS
Operating right-of-use assets	11,852,167		1,063,438
Security deposits	1,155,516		1,155,016
Total Non-current Assets	13,007,683		2,218,454
Total Assets	$ 28,126,708	$	25,999,814
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable – supplier financing	$ 32,327,766	$	26,244,987
Other payables and accrued liabilities	5,476,994		3,570,959
Other payable - related parties	7,000		272,917
Contract liabilities	142,852		378
Income taxes payable	65,243		76,743
Current maturity of long-term loan	24,094		23,743
Operating lease liabilities - current	1,839,557		211,525
Total Current Liabilities	39,883,506		30,401,252
NON-CURRENT LIABILITIES
Operating lease liabilities - non-current	36,003,926		889,827
Long-term loan - non-current	55,080		73,418
Total Non-current Liabilities	36,059,006		963,245
Total Liabilities	75,942,512		31,364,497
COMMITMENTS AND CONTINGENCIES (See Note 18)
STOCKHOLDERS’ DEFICIT
Common stock, $ 0.0001 par value, 50,000,000 shares authorized as of March 31, 2026 and June 30, 2025; 7,005,191 and 6,780,597 shares issued and outstanding as of March 31, 2026 and June 30, 2025, respectively	700		678
Additional paid-in capital	15,669,020		14,686,705
Accumulated deficit	( 63,468,413	)	( 20,047,064	)
Accumulated other comprehensive loss	( 17,111	)	( 5,002	)
Total Stockholders’ Deficit	( 47,815,804	)	( 5,364,683	)
Total Liabilities and Stockholders’ Deficit	$ 28,126,708	$	25,999,814

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FOXX DEVELOPMENT HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	For the Three Months Ended — March 31,		March 31,		For the Nine Months Ended — March 31,		March 31,
	2026		2025		2026		2025
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
REVENUES, NET	$ 8,666,261		$ 11,392,078		$ 45,606,134		$ 51,984,361
COST OF GOODS SOLD	10,116,838		10,728,765		42,095,364		48,732,206
GROSS (LOSS) PROFIT	( 1,450,577	)	663,313		3,510,770		3,252,155
OPERATING EXPENSES:
Selling expenses	964,440		1,551,369		3,008,663		4,393,150
General and administrative expenses	2,928,172		1,421,299		8,376,858		4,361,716
Research and development - related party	-		22,792		-		91,168
Research and development	1,085,588		826,532		1,585,228		1,550,833
Provision of credit losses	1,681,606		401,988		1,765,169		464,988
Impairments of right-of-use assets	25,855,427		-		25,855,427		-
Total Operating Expenses	32,515,233		4,223,980		40,591,345		10,861,855
LOSS FROM OPERATIONS	( 33,965,810	)	( 3,560,667	)	( 37,080,575	)	( 7,609,700	)
OTHER (EXPENSE) INCOME
Interest expense	( 2,304,183	)	( 1,553,993	)	( 6,319,324	)	( 3,005,186	)
Other expense, net	-		( 2,118	)	( 21,450	)	( 257	)
Change in fair value of earnout liabilities	-		1,032,267		-		5,687,989
Total Other (Expense) Income, net	( 2,304,183	)	( 523,844	)	( 6,340,774	)	2,682,546
LOSS BFORE INCOME TAXES	( 36,269,993	)	( 4,084,511	)	( 43,421,349	)	( 4,927,154	)
PROVISION FOR INCOME TAXES	-		-		-		-
NET LOSS	( 36,269,993	)	( 4,084,511	)	( 43,421,349	)	( 4,927,154	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustment	( 3,318	)	( 412	)	( 12,109	)	( 412	)
COMPREHENSIVE LOSS	$ ( 36,273,311	)	$ ( 4,084,923	)	$ ( 43,433,458	)	$ ( 4,927,566	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
Basic	6,989,278		7,050,260		6,886,673		5,937,756	*
Diluted	6,989,278		7,050,260		6,886,673		5,937,756	*
LOSS PER SHARE
Basic	$ ( 5.19	)	$ ( 0.58	)	$ ( 6.31	)	$ ( 0.83	)
Diluted	$ ( 5.19	)	$ ( 0.58	)	$ ( 6.31	)	$ ( 0.83	)

Giving retroactive effect to reverse recapitalization effected on September 26, 2024 to reflect exchange ratio of approximately 3.3033 as described in Note 4.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FOXX DEVELOPMENT HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ DEFICIT


			Additional				Accumulated
other
Common
stock			paid-in	Accumulated			comprehensive
Shares		Amount	capital	deficit			loss		Total
BALANCE, June 30, 2025	6,780,597	$ 678	$ 14,686,705	$	( 20,047,064	)	$ ( 5,002	)	( 5,364,683	)
Stock-based compensation expenses	-	-	296,797		-		-		296,797
Foreign currency translation	-	-	-		-		( 6,525	)	( 6,525	)
Net loss	-	-	-		( 2,865,442	)	-		( 2,865,442	)
BALANCE, September 30, 2025 (Unaudited)	6,780,597	678	14,983,502		( 22,912,506	)	( 11,527	)	( 7,939,853	)
Issuance of common stock under EIP	182,214	18	( 18	)	-		-		-
Stock-based compensation expenses	-	-	406,322		-		-		406,322
Foreign currency translation	-	-	-		-		( 2,266	)	( 2,266	)
Net loss	-	-	-		( 4,285,914	)	-		( 4,285,914	)
BALANCE, December 31, 2025 (Unaudited)	6,962,811	696	15,389,806		( 27,198,420	)	( 13,793	)	( 11,821,711	)
Issuance of common stock under EIP	42,380	4	( 4	)	-		-		-
Stock-based compensation expenses	-	-	279,218		-		-		279,218
Foreign currency translation	-	-	-		-		( 3,318	)	( 3,318	)
Net loss	-	-	-		( 36,269,993	)	-		( 36,269,993	)
BALANCE, March 31, 2026 (Unaudited)	7,005,191	$ 700	$ 15,669,020	$	( 63,468,413	)	$ ( 17,111	)	$ ( 47,815,804	)


				Additional					Accumulated
other
Common
stock				paid-in		Accumulated			comprehensive
Shares*		Amount		capital		deficit			loss		Total
BALANCE, June 30, 2024	3,303,333	$	330	$	7,024,162	$	( 11,026,928	)	$ -		$ ( 4,002,436	)
Conversion of convertible promissory notes into common stock upon completion of reverse recapitalization	1,696,668		170		15,408,515		-		-		15,408,685
Issuance of common stock upon completion of reverse recapitalization	2,270,096		227		( 2,100,865	)	-		-		( 2,100,638	)
Earnout liabilities	-		-		( 5,688,007	)	-		-		( 5,688,007	)
Transaction costs	-		-		( 893,577	)	-		-		( 893,577	)
Net loss	-		-		-		( 2,266,789	)	-		( 2,266,789	)
BALANCE, September 30, 2024 (Unaudited)	7,270,097		727		13,750,228		( 13,293,717	)	-		457,238
Issuance of common stock through exercise of warrants	10,500		1		120,749		-				120,750
Stock-based compensation expenses	-		-		200,954		-				200,954
Net income	-		-		-		1,424,146				1,424,146
BALANCE, December 31, 2024 (Unaudited)	7,280,597		728		14,071,931		( 11,869,571	)	-		2,203,088
Cancellation of common stock held in escrow	( 500,000	)	( 50	)	50		-		-		-
Stock-based compensation expenses	-		-		326,588		-		-		326,588
Foreign currency translation	-		-		-		-		( 412	)	( 412	)
Net loss	-		-		-		( 4,084,511	)	-		( 4,084,511	)
BALANCE, March 31, 2025 (Unaudited)	6,780,597	$	678	$	14,398,569	$	( 15,954,082	)	$ ( 412	)	$ ( 1,555,247	)

Giving retroactive effect to reverse recapitalization effected on September 26, 2024 to reflect exchange ratio of approximately 3.3033 as described in Note 4.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FOXX DEVELOPMENT HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended — March 31,		March 31,
	2026		2025
	(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ ( 43,421,349	)	$ ( 4,927,154	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	34,752		35,951
Interest expense from convertible promissory notes	-		140,740
Amortization of operating right of use assets	1,611,924		160,521
Provision of credit losses	1,765,169		464,988
Stock-based compensation expenses	982,337		527,542
Change in fair value of earnout liabilities	-		( 5,687,989	)
(Gain) loss on disposal of equipment	( 2,790	)	3,400
Impairments of inventories	4,663,144		-
Impairments of right-of-use assets	25,855,427		-
Change in operating assets and liabilities:
Accounts receivable	1,421,900		( 7,359,795	)
Inventories	1,058,486		( 14,893,859	)
Contract assets	413,118		16,259
Prepaid expenses and other current assets	635,470		( 1,049,412	)
Amount due from related parties - current	( 20,720	)	140
Security deposits	( 500	)	( 1,123,807	)
Accounts payable – supplier financing	6,082,779		27,958,120
Contract liabilities	142,474		( 438,378	)
Income taxes payable	( 11,500	)	( 299,585	)
Other payables and accrued liabilities	1,906,686		1,974,134
Other payable - related parties	( 265,917	)	( 32,007	)
Operating lease liabilities	( 1,513,949	)	( 123,471	)
Net cash provided by (used in) operating activities	1,336,941		( 4,653,662	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	-		( 68,336	)
Proceeds from disposal of equipment	8,826		28,100
Net cash provided by (used in) investing activities	8,826		( 40,236	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to short-term loans	-		( 291,208	)
Principal payments of long-term loan	( 17,988	)	( 14,432	)
Proceeds from convertible promissory note	-		9,000,000
Proceeds from reverse recapitalization, net of payments of transaction costs	-		19,710,288
Proceeds from issuance of common stock through exercise of warrants	-		120,750
Payment of redemption payable	-		( 20,499,790	)
Payments of deferred transaction costs	-		( 131,400	)
Net cash (used in) provided by financing activities	( 17,988	)	7,894,208
EFFECT OF EXCHANGE RATE CHANGES	( 12,758	)	2,297
NET CHANGE IN CASH	1,315,021		3,202,607
CASH, beginning of the period	1,875,453		587,448
CASH, end of the period	$ 3,190,474		$ 3,790,055
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$ 11,500		$ 50
Cash paid for interest	$ 5,332,263		$ 1,272,448
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Initial recognition of operating right-of-use assets and lease liabilities	$ 38,256,080		$ 750,338
Modification of operating right-of-use assets and lease liabilities	$ -		$ 121,655
Conversion of convertible promissory notes into common stock	$ -		$ 15,408,685
Reverse recapitalization transaction costs net against additional-paid in capital	$ -		$ 893,577
Deferred transaction costs included in other payables and accrued liabilities	$ -		$ 300,000
Initial recognition of earnout liabilities	$ -		$ 5,688,007

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FOXX DEVELOPMENT HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Nature of business and organization

Foxx Development Holdings Inc. (“Foxx” or the “Company”) was incorporated on November 13, 2023 under the name “Acri Capital Merger Sub I Inc.” On February 18, 2024, the Company entered into a business combination agreement (as amended on May 31, 2024, the “Business Combination Agreement”), by and among the Company, Acri Capital Acquisition Corporation, a Delaware corporation and our parent company at the time (“ACAC”), Acri Capital Merger Sub II Inc., a Delaware corporation and our wholly-owned subsidiary at the time (“Merger Sub”), and Foxx Development Inc. (“Old Foxx”), a Texas corporation incorporated on March 17, 2017 primarily engaged in the sales of electronic products, pursuant to which (i) ACAC merged with and into the Company, with the Company as the surviving Delaware corporation (the “Reincorporation Merger”), and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as a wholly-owned Delaware subsidiary of the Company (the “Acquisition Merger”). The Reincorporation Merger, the Acquisition Merger, and other transactions contemplated under the Business Combination Agreement, are collectively referred to as the “Business Combination” (See Note 4).

Following the consummation of the Business Combination (the “Closing”) on September 26, 2024, the Company was renamed as “Foxx Development Holdings Inc.” and became a publicly traded company. The Merger Sub was renamed as “Foxx Development Inc.” and became the Delaware subsidiary of the Company.

On August 29, 2023, Foxx Technology Pte Ltd, a Singapore private company (“Foxx Technology”), was incorporated in Singapore, with Old Foxx holding 51 % of the equity interests in Foxx Technology. Foxx Technology operated in the field of the manufacture of wireless communications equipment, and the wholesale of handphones, handphone peripheral equipment and other telecommunications equipment. On July 30, 2024, Foxx submitted the application to dissolve Foxx Technology to the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. On November 4, 2024, ACRA granted Foxx Technology’s application and struck it off from the company register of Singapore.

On March 3, 2025, Foxx Development (Singapore) Pte. Ltd (“Foxx Singapore”) was incorporated in Singapore. Foxx Singapore primarily engaged in assembling electronic products, and was 100 % owned by the Company. Foxx Singapore had no significant operations as of March 31, 2026.

On April 8, 2025, Foxx Technologies Inc (“Foxx Tech”) was incorporated in the State of California. Foxx Tech is 100 % owned by the Company. Foxx Tech had no significant operations as of March 31, 2026.

On May 19, 2025, Nexus IQ Technology Inc (Nexus IQ”) was incorporated in the State of Delaware. Nexus IQ primarily engaged in developing, sales and rental of products involving Artificial Intelligence of Things (“AIoT”) technologies and was 100 % owned by the Company. In December 2025, Nexus IQ began winding down its operations, disposed of related AIoT equipment, and sold its AIoT products to a third party.

Note 2 — Going Concern

In assessing the Company’s ability to continue as a going concern, the Company monitors and analyses its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses, and capital expenditure obligations.

The Company primarily engages in the sales of electronic products. Debt financing in the form of convertible notes, loans from bank, third parties, and related parties, and cash generated from operations have been utilized to finance the working capital. The Company’s management has considered whether there is substantial doubt about its ability to continue as a going concern due to (1) net loss of approximately $ 43.4 million for the nine months ended March 31, 2026, and (2) working capital deficit of approximately $ 24.9 million as of March 31, 2026.

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If the Company is unable to generate sufficient funds to finance its working capital requirements within the normal operating cycle of a twelve-month period from the date of the unaudited condensed consolidated financial statements are issued, the Company may have to consider supplementing its available sources of funds through the following sources:

● Other sources of available financing from banks in the United States of America and other financial institutions or private lenders;

● Financial support and credit guarantee commitments from the Company’s related parties; and

● Equity financing.

The Company can make no assurance that required financing will be available in the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or more of these events do not occur, or if subsequent capital raises are insufficient to bridge any financial and liquidity shortfall, there would likely be a material adverse effect on the Company and it would materially adversely affect its ability to continue as a going concern.

As such, the Company’s management has determined that the factors discussed above have raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

Note 3 — Basis of presentation and significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position and operation results have been included. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (the “10-Q”) should be read in conjunction with information in the Annual Report for the fiscal year ended June 30, 2025, on Form 10-K filed by the Company with the SEC on October 15, 2025.

Principles of consolidation

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one-half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the Board of Directors, or to cast a majority of votes at the meetings of directors.

Use of estimates and assumptions

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates.

Foreign currency translation and transactions

The reporting currency of the Company is the U.S. dollar. The functional currency for the holding company is the U.S. dollar (“USD”). In Singapore, the Company conducts its business in the local currency, Singapore dollar (“SGD”), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the Federal Reserve System at the end of the period. The statements of operations and cash flows are translated at the average translation rates during the reporting periods, and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive loss. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

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Translation adjustments are included in accumulated other comprehensive loss. The balance sheet amounts, with the exception of stockholders’ deficit at March 31, 2026, were translated at SGD 1.29 to USD 1.00 . The average translation rates applied to the unaudited condensed consolidated statements of operations and cash flows for the nine months ended March 31, 2026, were SGD 1.29 to USD 1.00 . The stockholders’ equity accounts were translated at their historical rates. Amounts reported on the unaudited condensed consolidated statement of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheets.

Segments

The Company uses the management approach in determining reportable operating segments. The management approach considers the internal reporting used by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer and his direct reports, for making operating decisions about the allocation of resources and the assessment of performance in determining the Company’s reportable operating segments. The Company’s CODM reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues, cost of revenues, and gross profit by business lines (electronic products revenues and App Service (as defined below) commission revenue) for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. In addition, all of the Company’s revenues are derived solely from the U.S. Accordingly, no geographical information is presented. Management has determined that the Company has one operating segment.

Accounts receivable

Accounts receivables are recognized and carried at the original invoiced amount less an allowance for any uncollectible accounts or expected credit losses. An allowance for credit losses for accounts receivables is established based on various factors, including historical payments and current economic trends. The Company reviews its allowance for credit loss by assessing individual accounts receivable over a specific aging and minimum baseline reserve percentage. All other balances are pooled based on historical collection experience, historical recovery speed, industry risk and broader economic trends. The estimate of expected credit losses is based on information about past events, current economic conditions, and forecasts of future economic conditions that affect collectability. Accounts receivable are written off on a case-by-case basis after exhaustive efforts at collection are made, net of any amounts that may be collected. As of March 31, 2026 and June 30, 2025, $ 1,848,648 and $ 595,907 , respectively, of allowance for credit losses of accounts receivable was recorded, and the Company had net accounts receivable of $ 4,112,151 and $ 6,786,792 , respectively.

Inventories

Inventories are stated at the lower cost or net realizable value. The estimated selling prices in the ordinary course of business, less reasonably predictable 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. When inventories are written down to net realizable value, they are not marked up subsequently based on changes in underlying facts and circumstances.

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 March 31, 2026 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.

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Long-lived assets

The Company reviews the impairment of its long-lived assets 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. These events or changes in circumstances may include but are not limited to, a significant deterioration of operating results, a change in the regulatory environment, changes in business plans, or adverse changes in anticipated future cash flows. The Company’s approach for determining and measuring impairment in long-lived asset groups is to exclude operating lease liabilities from the asset group. If an impairment indicator is present, the Company evaluates the recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to result from the use and eventual disposition of the assets. If the assets are determined to be impaired, the impairment recognized is the excess of the carrying amount over the fair value of the assets. Fair value is generally determined by the discounted cash flow method. The discount rate used in any estimate of discounted cash flows is the rate commensurate with a similar investment of similar risk. During the three months ended March 31, 2026 and 2025, the Company recognized $ 25,855,427 and $ 0 impairment of long-lived assets, respectively. During the nine months ended March 31, 2026 and 2025, the Company recognized $ 25,855,427 and $ 0 impairment of long-lived assets, respectively.

Lease

The Company accounts for leases in accordance with ASC 842, Leases . The Company categorizes leases with contractual terms longer than 12 months as either operating or finance. Finance leases are generally those leases that substantially utilize or pay for the entire asset over their estimated life. All other leases are categorized as operating leases. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. As of March 31, 2026 and June 30, 2025, the Company does not have finance leases.

The Company determines if an arrangement is, or contains, a lease at inception. Operating lease assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and operating lease liabilities represent its obligation to make lease payments arising from the aforementioned right.

Operating lease right-of-use (“ROU”) assets and liabilities are initially recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the implicit rate for each of the Company’s leases is not readily determinable, the Company uses incremental borrowing rate as effective interest rate, based on the information available at the lease commencement date in determining the present value of its expected lease payments. Operating lease assets also include any initial direct costs and any lease payments made prior to the lease commencement date and are reduced by any lease incentives received. According to ASC 842-10-15-37, a lessee may, as an accounting policy election by class of underlying asset, choose not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. The Company has identified the common area maintenance (“CAM”) fee as a non-lease component and elected to not separate it from the lease component.

Operating lease assets are amortized on a straight-line basis in operating lease expense over the lease term on the consolidated statements of operations. The related amortization of ROU assets along with the change in the operating lease liabilities are separately presented within the cash flows from operating activities on the consolidated statements of cash flows. The Company records lease expenses for operating leases on a straight-line basis over the lease term.

The Company reviews the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets on an annual basis. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease right-of-use assets in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows.

For a lease with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liability. For the lease that with lease term of one year or shorter, the Company has elected to not recognize right-of-use asset and lease liability.

Warranty

The Company generally provides 30 -day warranties or 1 -year warranties for its product sold to its wholesale customer if an additional 1-3% of products on top of each customer’s order was not provided. For the sale transactions that were provided with 1-3% of products on top of each customer’s order, these additional 1-3% products were recognized as cost of goods sold at the same time the respective sale is recognized. For the sales transactions that the Company provided limited warranties to both wholesale customers and e-commerce customers, the Company records estimated future warranty costs under ASC 460, Guarantees . Such estimated costs for warranties are estimated at the time of delivery, and these warranties are not service warranties separately sold by the Company. Generally, the estimated claim rates of warranties are based on actual warranty experience or the Company’s best estimate. As of March 31, 2026 and June 30, 2025, the Company accrued warranty reserves of $ 472,697 and $ 328,438 , respectively recorded under accrued liabilities and other current liabilities, and these reserves were recognized based on estimation and judgment from the Company’s management.

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Practical expedient

The Company applies the practical expedient in ASC 606 to expense as incurred, the costs to obtain a contract with a customer when the amortization period is one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets for the three and nine months ended March 31, 2026 and 2025.

Interest expenses

Interest expenses consist primarily of interest incurred on convertible notes, which were cancelled in exchange for the holders’ pro rata share of the Closing Payment Shares following consummation of the Business Combination (see Note 4), unpaid purchase balance from a vendor (see Note 10), and borrowings and others. For the three months ended March 31, 2026 and 2025, the Company had interest expenses that amounted to $ 2,304,183 and $ 1,553,993 , respectively. Of the total interest expense for the three months ended March 31, 2026, $ 2,301,681 was related to unpaid purchase balance and $ 2,502 to borrowings and others. Of the total interest expense for the three months ended March 31, 2025, $ 1,553,993 was related to unpaid purchase balance. For the nine months ended March 31, 2026 and 2025, the Company had interest expenses that amounted to $ 6,319,324 and $ 3,005,186 , respectively. Of the total interest expense for the nine months ended March 31, 2026, $ 6,310,353 was related to unpaid purchase balance and $ 8,971 to borrowings and others. Of the total interest expense for the nine months ended March 31, 2025, $ 140,740 was related to convertible notes, $ 2,862,722 to unpaid purchase balance, and $ 1,724 to borrowings and others.

Recently adopted accounting standards

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

Recently issued accounting pronouncements not yet adopted

In December 2023, FASB issued ASU No. 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual consolidated financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact these standards will have on its financial statements.

In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact these standards will have on its financial statements.

In July 2025, FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Subtopic 326) (“ASU 2025-05”), to simply the Current Expected Credit Loss (CECL) model for accounts receivable and contract assets by offering a practical expedient to use current conditions for forecasts and an accounting policy election to consider post-balance sheet collections, allowing for early adoption for financial statements not yet issued. The guidance is effective for annual reporting periods beginning after December 15, 2025, but early adoption is permitted. The Company is currently evaluating the impact these standards will have on its financial statements.

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Note 4 — Reverse recapitalization

Upon the consummation of the Business Combination, these transactions were completed, based on the Company’s capitalization as of September 26, 2024 (the “Closing Date”): (i) all 2,270,096 ACAC outstanding shares were converted on a one-for-one basis into the Company’s 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 (see Note 13), to receive such stockholder’s pro rata share of 5,000,000 shares (“Closing Payment Shares”) of the Company’s 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 the Company’s Common Stock at the exchange ratio of 3.3033 ; (iii) 4,200,000 shares (“Earnout Shares”) of the Company’s Common Stock were reserved for issuance to Old Foxx’s stockholders subject to the vesting schedule based on the Company’s financial performance for the fiscal years ended June 30, 2025 and 2024. The Earnout Shares were forfeited since the Company 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 warrants of the Company.

The following table presents the number of the Company’s common stock issued and outstanding immediately following the Reverse Recapitalization (as defined below):


Stock
ACAC’s common stock outstanding prior to Reverse Recapitalization	3,971,634
Less: redemption of ACAC’s common stock	( 1,744,663	)
Common stock issued to underwriter	43,125
Conversion of Old Foxx’s common stock into Foxx’s common stock	3,303,333
Conversion of Old Foxx’s convertible promissory notes into Foxx’s common stock	1,696,668
Total common stock	7,270,097

Old Foxx was determined to be the accounting acquirer given Old Foxx effectively controlled the combined entity after the Business Combination. The transaction is accounted for as a reverse recapitalization (“Reverse Recapitalization”), which is equivalent to the issuance of common stock by Old Foxx for the net monetary assets of ACAC, accompanied by a recapitalization. Old Foxx is determined as the accounting acquirer and the historical financial statements of Old Foxx became the Company’s historical financial statements, with retrospective adjustments to give effect of the Reverse Recapitalization. The net assets of ACAC were recognized as of Closing date at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Old Foxx and Old Foxx’s operations are the only ongoing operations of the Company.

In connection with the Reverse Recapitalization, the Company raised approximately $ 19.7 million of proceeds, presented as cash flows from financing activities.

The following table reconciles the elements of the Reverse Recapitalization to the consolidated statements of cash flows and the changes in stockholders’ deficit:

	September 26,
	2024
Funds held in ACAC’s trust account	$ 21,627,541
Funds held in ACAC’s operating cash account	298,643
Less: payments of transaction costs incurred by ACAC	( 2,215,896	)
Proceeds from the Reverse Recapitalization	19,710,288
Less: non-cash net deficit assumed from ACAC	( 21,810,926	)
Net distributions from issuance of Common Stock upon the Reverse Recapitalization	$ ( 2,100,638	)

The shares and corresponding capital amounts and all per share data related to Old Foxx’s outstanding common stock prior to the Reverse Recapitalization have been retroactively adjusted using the Exchange Ratio of 3.3033 .

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Note 5 — Accounts receivable, net

As of March 31, 2026 and June 30, 2025, accounts receivable consist of the following:

	March 31, 2026
	(Unaudited)
Accounts receivable	$ 5,960,799	$	7,382,699
Less: allowance for credit losses	( 1,848,648	)	( 595,907	)
Accounts receivable, net	$ 4,112,151	$	6,786,792

For the three months ended March 31, 2026 and 2025, the Company recognized $ 1,252,741 and $ 401,988 on net provision for allowance on credit losses for accounts receivable, respectively. For the nine months ended March 31, 2026 and 2025, the Company recognized $ 1,370,122 and $ 464,988 on net provision for allowance on credit losses for accounts receivable, respectively.

Movement of allowance for credit losses consisted of the following for the periods ended indicated:

	For the Three Months Ended March 31, — 2026	2025
	(Unaudited)	(Unaudited)
Balance as of the beginning of the period	$ 478,526	$	63,000
Addition	1,556,534		401,988
Recovery	( 186,412	)	-
Balance as of the end of the period	$ 1,848,648	$	464,988

	For the Nine Months Ended March 31, — 2026	2025
	(Unaudited)	(Unaudited)
Balance as of the beginning of the period	$ 595,907	$	-
Addition	1,597,648		464,988
(Recovery)	( 344,907	)	-
Balance as of the end of the period	$ 1,848,648	$	464,988

Note 6 — Inventories

As of March 31, 2026 and June 30, 2025, inventories consist of the following:

	March 31, 2026	June 30, 2025
	(Unaudited)
Finished goods	$ 6,965,109	$ 12,686,739
Total inventories	$ 6,965,109	$ 12,686,739

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For the three months ended March 31, 2026 and 2025, the impairment for inventories amounted to $ 3,092,282 and $ 0 , respectively. For the nine months ended March 31, 2026 and 2025, the impairment for inventories amounted to $ 4,663,144 and $ 0 , respectively.

Note 7 — Contract assets

The following table presents the Company’s contract assets balances and changes therein:

	Three Months Ended March 31 — 2026	2025		2026		2025
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Balance as of the beginning of the period	$ 138,664	$	1,603,267	$	454,842	$	1,682,289
Add: net increase in current period contract asset	-		434,910		41,724		1,663,773
Less: inventory received from beginning contract asset	( 96,940	)	( 374,404	)	( 454,842	)	( 1,682,289	)
Total contract assets as the end of the period	$ 41,724	$	1,663,773	$	41,724	$	1,663,773

Note 8 — Prepaid expenses and other current assets

As of March 31, 2026 and June 30, 2025, prepaid expenses and other current assets consist of the following:

	March 31, 2026
	(Unaudited)
Other receivables (1)	$ 213,565	$	177,814
Prepaid rent	-		355,677
Prepaid research and development fees	259,828		198,328
Prepaid insurance and subscriptions	391,265		153,659
Prepaid professional fee	13,364		96,839
Prepayment to be refunded (2)	616,116		1,116,116
Advances to a third party	18,500		19,500
Other prepaid expenses	6,956		37,161
Less: allowance for credit losses (1) (2)	( 829,681	)	( 317,282	)
Total prepaid expenses and other current assets	$ 689,913	$	1,837,812

(1) This represents receivables from payments made on behalf of a vendor and other fees and bank fee receivables. $ 213,565 and $ 48,317 allowance for credit losses was recorded for the balances due to aging of the receivables as of March 31, 2026 and June 30, 2025, respectively.

(2) This represents prepayment to be refunded resulting from the cancellation of purchase orders. $ 616,116 and $ 268,965 allowance for credit losses was recorded for the balances due to aging of the prepayments as of March 31, 2026 and June 30, 2025, respectively.

For the three months ended March 31, 2026 and 2025, the Company recognized $ 200,751 and $ 0 on provision of allowance on credit losses for prepaid expenses and other current assets, respectively. For the nine months ended March 31, 2026 and 2025, the Company recognized $ 401,695 and $ 0 on provision of allowance on credit losses for prepaid expenses and other current assets, respectively.

Movement of allowance for credit losses consisted of the following for the period ended the date indicated:

	For the Three Months Ended March 31, — 2026	2025
	(Unaudited)	(Unaudited)
Balance as of the beginning of the period	$ 518,226	$ -
Addition	311,455	-
Balance as of the end of the period	$ 829,681	$ -

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	For the Nine Months Ended March 31, — 2026	2025
	(Unaudited)	(Unaudited)
Balance as of the beginning of the period	$ 317,282	$ -
Addition	512,399	-
Balance as of the end of the period	$ 829,681	$ -

Note 9 — Property and equipment, net

As of March 31, 2026 and June 30, 2025, property and equipment, net consist of the following:

	March 31, 2026
	(Unaudited)
Computer and office equipment	$ 11,808	$	12,580
Equipment	23,597		30,697
Furniture and fixtures	3,432		3,432
Vehicles	191,091		191,091
Subtotal	229,928		237,800
Less: accumulated depreciation	( 138,994	)	( 106,078	)
Total property and equipment, net	$ 90,934	$	131,722

Depreciation expense for the three months ended March 31, 2026 and 2025 amounted to $ 11,387 and $ 12,364 , respectively. Depreciation expense for the nine months ended March 31, 2026 and 2025 amounted to $ 34,752 and $ 35,951 , respectively.

Note 10 — Other payables and accrued liabilities

As of March 31, 2026 and June 30, 2025, other payables and accrued liabilities consist of the following:

	March 31, 2026	June 30, 2025
	(Unaudited)
Payroll and payable tax payable	$ 82,739	$ 174,684
Interest payable*	3,110,408	2,309,106
Professional fee payable	157,244	168,186
Accrued warranty expenses	472,697	328,438
Excise tax payable**	556,620	556,620
Refunds payable	111,126	-
Research and development (“R&D”) fee payable***	934,500	-
Others	51,660	33,925
Total other payables and accrued liabilities	$ 5,476,994	$ 3,570,959

On April 9, 2024, the Company and a vendor entered into a purchase and financing agreement, pursuant to which the Company is subject to interest of 1.5 % per month, or 0.05 % per day, on the unpaid purchase amount, after forty-five (45) days from the date of shipment. There is an additional 0.083 % per day if after 120 days from the date of shipment. As of March 31, 2026 and June 30, 2025, the accounts payable – supplier financing balance due to this vendor were $ 32,327,516 and $ 26,244,987 , respectively.

**	These balances were carried from ACAC, and payable by the Company, as a result on 1 % excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023 under the Inflation Reduction Act of 2022.
***	In January 2026, the Company and a third party entered into a R&D agreement, pursuant to which the third party will provide the Company technical development services for the operating system of the Company’s mobile phone products in three phases, and the Company will pay a total of $ 3,115,00 in four milestone-based installments. As of March 31, 2026, the Company was obligated to pay the first installment of $ 934,500 . These balances represented balances due to a third party developer for their technical development services performed on the operating system.

These balances were carried from ACAC, and payable by the Company, as a result on 1 % excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023 under the Inflation Reduction Act of 2022.

***

In January 2026, the Company and a third party entered into a R&D agreement, pursuant to which the third party will provide the Company technical development services for the operating system of the Company’s mobile phone products in three phases, and the Company will pay a total of $ 3,115,00 in four milestone-based installments. As of March 31, 2026, the Company was obligated to pay the first installment of $ 934,500 . These balances represented balances due to a third party developer for their technical development services performed on the operating system.

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Note 11 — Contract liabilities

Contract liabilities consist of customer deposits, which are recorded on the consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.

The following table presents the Company’s contract liabilities balances and changes therein:

	Three Months Ended March 31 — 2026	2025		2026		2025
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Balance, beginning of the period	$ 23,525	$	784,157	$	378	$	649,450
Add: net increase in current period contract liabilities	123,500		211,072		142,852		211,072
Less: revenue recognized from beginning contract liabilities	( 4,173	)	( 784,157	)	( 378	)	( 649,450	)
Total contract liabilities	$ 142,852	$	211,072	$	142,852	$	211,072

Note 12 — Related party balances and transactions

Related party balances

Prepaid expenses to a related party

Name of Related Party	Relationship	Nature	March 31, 2026	June 30, 2025
			(Unaudited)
Azure Horizon LLC (“Azure”)	Owned by an immediate family member of the Company’s 10% or more shareholder (a “10%+ shareholder”)	Prepaid service fees	$ -	$ 8,000

Amount due from related parties - current

Amount due from related parties consists of the following:

Name of Related Party	Relationship	Nature		June 30, 2025
		(Unaudited)
Haitao Cui (1)	Executive Vice President and Director of the Company	Paid on behalf fees	20,868	-
Luying Mei (1)	Executive Vice President of Sales of Old Foxx	Paid on behalf fees	7,852	-
Total		$	2 8,720	$ -

(1) In November 2025, two executive officers of the Company incurred a reimbursement obligation to the Company for withholding taxes paid on their behalf in connection with the vesting of Restricted Stock Units (RSUs). While the arrangement was initially structured to be settled via semi-monthly payroll deductions, the Company and the officers subsequently amended the terms of the arrangement to ensure compliance with Section 402 of the Sarbanes-Oxley Act of 2002. Pursuant to the amended terms, the officers have committed to fully reimburse the Company for the remaining balance in a single lump-sum payment prior to May 31, 2026.

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Other payable — related party

Other payable — related parties consists of the following:

Name of Related Party	Relationship	Nature	March 31, 2026	June 30, 2025
			(Unaudited)
Wuhan Haoxun Communication Technology Co. Ltd (“Wuhan Haoxun”) (1)	Controlled by an immediate family member of the Company’s 10%+ shareholder	Research and development fees	$ -	$ 18,792
Acri Capital Sponsor LLC	the Company’s 10%+ shareholder	Unconverted working capital loan balance in ACAC	-	245,509
Swiftfulfill Warehouse LLC (“Swiftfulfill”) (2)	Owned by an immediate family member of the Company’s 10%+ shareholder	Consulting fees and expenses paid on behalf of the Company	7,000	8,566
“Joy” Yi Hua	Chairwoman, Chief Financial Officer and Director of the Company	Expenses paid on behalf of the Company	-	50
Total			$ 7,000	$ 272,917

(1) On September 1, 2022, the Company entered into an agreement with Wuhan Haoxun for the research and development project. The project was completed during the year ended June 30, 2025.

(2) On October 1, 2024, the Company entered into a consulting agreement to receive consulting services provided by Swiftfulfill, a consulting company which is owned by an immediate family member of a 10 %+ shareholder.

Related party transactions

Research and development expenses

Name of Related Party	Relationship	For the Three Months Ended March 31, 2026	For the Three Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Wuhan Haoxun (1)	Controlled by an immediate family member of the Company’s 10%+ shareholder	$ -	$ 22,792

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Name of Related Party	Relationship	For the Nine Months Ended March 31, 2026	For the Nine Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Wuhan Haoxun (1)	Controlled by an immediate family member of the Company’s 10%+ shareholder	$ -	$ 91,168

(1) On September 1, 2022, the Company entered into an agreement with Wuhan Haoxun for a research and development project. The project was completed during the year ended June 30, 2025.

Consulting expenses

Name of Related Party	Relationship	For the Three Months Ended March 31, 2026	For the Three Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Azure (1)	Owned by an immediate family member of the Company’s 10%+ shareholder	$ 24,600	$ 141,000
Swiftfulfill (2)	Owned by an immediate family member of the Company’s 10%+ shareholder	21,000	-
Total		$ 45,600	141,000

Name of Related Party	Relationship	For the Nine Months Ended March 31, 2026	For the Nine Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Azure (1)	Owned by an immediate family member of the Company’s 10%+ shareholder	$ 73,800	$ 423,000
Swiftfulfill (2)	Owned by an immediate family member of the Company’s 10%+ shareholder	70,000	-
Total		$ 143,800	423,000

(1) On September 1, 2022, the Company entered into a consulting agreement to receive consulting services provided by Azure, a consulting company which is owned by an immediate family member of a 10 %+ shareholder.

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Note 13 — Convertible promissory notes

From June 2023 to May 2024, Old Foxx issued four convertible promissory notes (the “Notes”) to three investors, in an aggregated principal amount of $ 15,000,000 and an interest rate of 7 % per annum. Each note would mature on the earlier of the 12 -month anniversary of its issuance date, or the date of the initial closing of the initial public offering (“IPO”) of Old Foxx. Immediately prior to the Closing on September 26, 2024, the Notes of $ 15,000,000 and the related interests of $ 408,685 were automatically converted into 513,622 share of Old Foxx Common Stock, each at a price of $ 30.00 per share. On September 26, 2024, upon Closing of the Business Combination, all the Old Foxx Common Stock converted from the convertible promissory notes were cancelled in exchange for the holders’ pro rata share of the 5,000,000 Closing Payment Shares, resulting in a total of 1,696,668 shares of the Company’s Common Stock issued to the holders of the Notes at the exchange ratio of approximately 3.3033 following consummation of the Business Combination (see Note 4).

Note 14 — Long-term loan

In February 2023, the Company purchased and financed a vehicle, for which the lender put a lien on the title and will be taken as collateral in the situation if the Company is unable to make repayment and default on the loan, with a six-year loan for a total of approximately $ 137,000 . As of March 31, 2026, the carrying value of the asset that has been pledged as a collateral is $ 46,677 . The monthly payments are $ 2,694 from March 2023 to February 2029, with an interest rate of 11.85 % per annum.

The obligation is payable as follows:

For the three months ending June 30, 2026	Amount — $ 5,756
For the twelve months ending June 30, 2027	24,826
For the twelve months ending June 30, 2028	27,984
Thereafter	20,608
Total long-term debt payment	79,174
Current portion of long-term debt	( 24,094	)
Long-term debt – non-current portion	$ 55,080

Interest expense for the three months ended March 31, 2026 and 2025 for the above loan amounted to $ 2,495 and $ 3,125 , respectively. Interest expense for the nine months ended March 31, 2026 and 2025 for the above loan amounted to $ 7,973 and $ 9,809 , respectively.

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Note 15 — Stockholders’ deficit

Common stock

As of March 31, 2026 and June 30, 2025, the Company has 50,000,000 authorized shares of common stock, par value $ 0.0001 per share. As of March 31, 2026 and June 30, 2025, there are 7,005,191 and 6,780,597 shares of common stock outstanding, respectively.

Issuance of common stock upon completion of the Reverse Recapitalization

On September 26, 2024, upon the consummation of the business combination, the Company issued an aggregated total of 2,270,096 common stock to ACAC shareholders and its underwriter.

The following table presents the number of the Company’s common stock issued upon completion of the Reverse Recapitalization:


Stock
ACAC’s common stock outstanding prior to Reverse Recapitalization	3,971,634
Less: redemption of ACAC’s common stock	( 1,744,663	)
Common stock issued to underwriter	43,125
Total common stock issued upon completion of the Reverse Recapitalization	2,270,096

Conversion of convertible promissory notes into common stock

On September 26, 2024, upon the consummation of the business combination, the Company issued an aggregated total of 1,696,668 common stock to the Old Foxx convertible notes holders (See Note 13).

Equity incentive plan

On September 24, 2024, pursuant to the Equity Incentive Plan (the “EIP”), 1,454,019 shares of common stock, par value $ 0.0001 per share, of the Company were set aside and reserved for issuance of certain stock option award and certain restricted shares to certain of the Company’s employees and consultants. The EIP has a 4-year vesting schedule, of which, 25 % will be vested after year 1 with the 1/16th of these shares will vest each quarter thereafter on the same day of the month as the grant date. The vesting of each RSU is subject to the employee’s continued employment and the consultant’s continued engagement through applicable vesting dates.

On November 5, 2024, the Company granted 707,860 restricted stock units (“RSUs”) to its employees, consultants, and independent directors under its EIP. These shares have a 4 -year vesting schedule of which 25 % will be vested after year 1 with the 1/16th of these shares will vest each quarter thereafter on the same day of the month as the grant date. The vesting of each RSU is subject to the employee’s continued employment and the consultant’s continued engagement through applicable vesting dates.

On January 22, 2025, the Company granted 19,149 RSUs to one of its independent directors pursuant to the EIP. These shares have a 4 -year vesting schedule, of which 25 % will be vested after year 1 with the 1/16th of these shares will vest each quarter thereafter on the same day of the month as the grant date. The vesting of each RSU is subject to the director’s continued employment through applicable vesting date.

On April 24, 2025, the Company cancelled 33,080 unvested RSUs previously granted to one of its consultants on November 5, 2024, due to termination of the consultant’s engagement.

On July 31, 2025, the Company cancelled 9,574 unvested RSUs previously granted to one of its employees on November 5, 2024, due to termination of the employment.

On November 4, 2025, two of the Company’s employees resigned from their position with the Company and the Company agreed to accelerate the vesting term for an immediate vesting for a total of 31,819 or approximately 50 % of their unvested RSUs previously granted to them due to termination of their employment, resulting in an acceleration of $ 174,204 recorded in stock-based compensation during the six months ended December 31, 2025. A total of 31,817 or approximately 50 % of their unvested RSUs previously granted to them were forfeited due to termination of their employment, resulting in a forfeiture $ 58,068 recorded in stock-based compensation during the six months ended December 31, 2025.

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The RSUs are accounted for as equity awards and are measured at fair value based upon the grant date market value of the Company’s common stock. Compensation expense is recognized on a straight-line basis over the vesting service period of four years . Forfeitures are accounted for as they occur.

The following table presents the total stock-based compensation expenses included in each of the respective expense line items for the periods presented:

	For the Three Months Ended — March 31,		For the Nine Months Ended — March 31,
	2026	2025	2026	2025
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Selling expenses	$ 37,830	$ 28,513	$ 269,628	$ 132,952
General and administrative expenses	172,599	224,917	517,795	275,912
Research and development expenses	68,789	73,158	194,914	118,678
Total stock-based compensation expenses	$ 279,218	$ 326,588	$ 982,337	$ 527,542

The following table summarizes the activity for all restricted stock units granted for the three and nine months ended March 31, 2026 and 2025:

Unvested at June 30, 2025	693,929		Weight average grant date fair value — $ 7.21	Total fair value — $ 5,001,916		3.36
Granted	-		$ -	-		-
Vested	-		$ -	-		-
Forfeited	( 9,574	)	$ 7.30	( 69,891	)	-
Unvested at September 30, 2025	684,355		$ 7.21	4,932,025		3.11
Granted	-		$ -	-		-
Vested	( 182,214	)	$ 7.30	( 1,330,162	)	-
Forfeited	( 31,817	)	$ 7.30	( 232,264	)	-
Unvested at December 31, 2025	470,324		$ 7.16	3,369,599		2.86
Granted	-		$ -	-		-
Vested	( 42,380	)	$ 6.92	( 293,433	)	-
Forfeited	-		$ -	-		-
Unvested at March 31, 2026	427,944		$ 7.19	$ 3,076,166		2.61

Unvested at July 1, 2024	-	Weight average grant date fair value — $ -	Total fair value — $ -	-
Granted	-	-	-	-
Vested	-	-	-	-
Forfeited	-	-	-	-
Unvested at September 30, 2024	-	-	-	-
Granted	707,860	7.30	5,167,378	4.00
Vested	-	-	-	-
Forfeited	-	-	-	-
Unvested at December 31, 2024	707,860	7.30	5,167,378	3.85
Granted	19,149	3.97	76,022	4.00
Vested	-	-	-	-
Forfeited	-	-	-	-
Unvested at March 31, 2025	727,009	$ 7.21	$ 5,243,400	3.61

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As of March 31, 2026, there was $ 2,901,739 total unrecognized compensation cost related to unvested RSUs granted under the employee incentive plan. The total cost is expected to be recognized over a remaining period of 2.61 years.

Earnout Shares

As described in Note 4 - Reverse recapitalization, the entitlement of the 4,200,000 Earnout Shares were forfeited because the Company did not meet the earnout requirements for the fiscal year ended June 30, 2025 and 2024 .

As of September 26, 2024 (the Closing Date), the fair value of the earnout liabilities was $ 5,688,007 . For the three months ended March 31, 2026 and 2025, the Company recognized gains of $ 0 and $ 1,032,267 , respectively, related to the change in fair value of earnout liabilities included in the change in fair value of earnout liabilities in the consolidated statements of operations. For the nine months ended March 31, 2026 and 2025, the Company recognized gains of $ 0 and $ 5,687,989 , respectively, related to the change in fair value of earnout liabilities included in the change in fair value of earnout liabilities in the consolidated statements of operations.

Warrants

In connection with the reverse recapitalization, each of 12,156,417 ACAC’s issued and outstanding warrants was converted automatically into one redeemable warrant of the Company, exercisable for one share of common stock of the Company at an exercise price of $ 11.50 per share. All of these warrants met the criteria for equity classification.

The Company may call the Warrants for redemption, in whole and not in part, at a price of $ 0.01 per Warrant:

● in whole and not in part;

● upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

● if, and only if, the reported last sale price of the common stock equals or exceeds $ 16.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.

On October 3, 2024, the Company’s shareholders (ACAC’s public shareholders) exercised 10,500 warrants in the amount of $ 120,750 or $ 11.50 per share.

The summary of warrants activity is as follows:

June 30, 2025	12,145,917	12,145,917	Weighted Average Exercise Price — $ 11.50	4.24
Granted	-	-	$ -	-
Forfeited	-	-	$ -	-
Exercised	-	-	$ -	-
September 30, 2025	12,145,917	12,145,917	$ 11.50	3.99
Granted	-	-	$ -	-
Forfeited	-	-	$ -	-
Exercised	-	-	$ -	-
December 31, 2025	12,145,917	12,145,917	$ 11.50	3.74
Granted	-	-	$ -	-
Forfeited	-	-	$ -	-
Exercised	-	-	$ -	-
March 31, 2026	12,145,917	12,145,917	$ 11.50	3.49

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June 30, 2024					Weighted Average Exercise Price — $ -	-
Granted	12,156,417		12,156,417		$ 11.50	5.00
Forfeited	-		-		$ -	-
Exercised	-		-		$ -	-
September 30, 2024	12,156,417		12,156,417		$ 11.50	4.99
Granted	-		-		$ -	-
Forfeited	-		-		$ -	-
Exercised	( 10,500	)	( 10,500	)	$ 11.50	-
December 31, 2024	12,145,917		12,145,917		$ 11.50	4.74
Granted	-		-		$ -	-
Forfeited	-		-		$ -	-
Exercised	-		-		$ -	-
March 31, 2025	12,145,917		12,145,917		$ 11.50	4.49

The Company accounted for the 12,145,917 Warrants assumed from the merger as equity instruments in accordance with ASC 480, Distinguishing Liabilities from Equity , and ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity . As of March 31, 2026 and June 30, 2025, the Warrants had no intrinsic value, as the Company’s stock price was below the strike price.

Note 16 — Concentrations of risks

(a) Major customers

For the three months ended March 31, 2026, one customer, customer A, which is a third party of the Company, accounted for 83 % of the Company’s total revenues.

For the three months ended March 31, 2025, four customers, customer B, customer C, customer D, and customer E, which are the third parties of the Company, accounted for 32 %, 20 %, 20 % and 13 %, respectively, of the Company’s total revenues.

For the nine months ended March 31, 2026, one customer, customer A, which is a third party of the Company, accounted for 73 % of the Company’s total revenues.

For the nine months ended March 31, 2025, three customers, customer A, customer B and customer C, which are the third parties of the Company, accounted for 27 %, 29 % and 23 %, respectively, of the Company’s total revenues.

(b) Major suppliers

For the three months ended March 31, 2026, one supplier, supplier A, which is a third party of the Company, accounted for 98 % of the Company’s total purchases.

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For the three months ended March 31, 2025, one supplier, supplier A, which is a third party of the Company, accounted for 92 % of the Company’s total purchases.

For the nine months ended March 31, 2026, one supplier, supplier A, which is a third party of the Company, accounted for 97 % of the Company’s total purchases.

For the nine months ended March 31, 2025, one supplier, supplier A, which is a third party of the Company, accounted for 93 % of the Company’s total purchases.

For the three and nine months ended March 31, 2026 and 2025, all of the Company’s long-lived assets are located in the United States and substantially all of the Company’s revenues are derived from the United States, accordingly, no geographical information is presented.

Note 17 — Leases

Short-term leases

On August 1, 2023, the Company entered a twelve-month lease agreement to rent a general office and storage space for its purchased inventory for a monthly rental fee of $ 100 . The Company renewed the lease for another twelve months at a monthly rental fee of $ 200 .

On August 14, 2023, the Company entered a six-month lease agreement to rent an office for operating purposes with a monthly rental fee of $ 550 . After the initial six-month term, the lease was renewed on a month-to-month basis.

Long-term leases

In September 2023, the Company signed a three-year lease agreement to rent a general office and storage space for business operations with a monthly rent of $ 3,096 , plus varied monthly CAM. The commencement date of this lease is October 1, 2023 and has no renewal option. On July 17, 2024, the Company extended the lease for another 35 months to be commenced on October 1, 2026 and ended August 31, 2029 . The Company considered this lease as an operating lease and recognized right-of-use asset and lease liability. The Company recognized lease expense on a straight-line basis over the lease term for operating lease.

In June 2024, the Company signed a six year and 11.5 months lease agreement to rent a general office for business operations with a monthly rent of $ 3,500 , plus varied monthly CAM. The commencement date of this lease is June 15, 2024 and the expiration date is May 31, 2031. The Company considered this lease as an operating lease and recognized right-of-use asset and lease liability. The Company recognized lease expense on a straight-line basis over the lease term for operating lease.

On July 17, 2024, the Company signed a five-year and one-half month lease agreement to rent a general office and storage space for business operations with a monthly rent of $ 10,534 , plus varied monthly CAM. The commencement date of this lease is August 15, 2024 and has no renewal option. The Company considered this lease as an operating lease and recognized right-of-use asset and lease liability. The Company recognized lease expense on a straight-line basis over the lease term for operating lease.

On July 12, 2024, the Company signed and further amended a ten-and-half-year lease agreement (“July 2024 Lease”) to rent a 101,145 square feet factory and warehouse for business operations with an initial monthly rent of $ 131,489 , plus varied monthly operating expenses and real estate tax. The commencement date of this lease is July 1, 2025 and the expiration date is December 31, 2035. The Company considered this lease as an operating lease and recognized right-of-use asset and lease liability. The Company recognized lease expense on a straight-line basis over the lease term for operating lease.

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On December 20, 2024, the Company further expanded the July 2024 Lease to include additional 102,099 square feet from January 1, 2026 to December 31, 2035 with an initial monthly rent of $ 132,729 , plus varied monthly operating expenses and real estate tax. The commencement date of this lease is January 1, 2026 and the expiration date is December 31, 2035. The Company considered this lease as an operating lease and recognized right-of-use asset and lease liability. The Company recognized lease expense on a straight-line basis over the lease term for operating lease.

The ROU assets and lease liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using incremental borrowing rate as the effective interest rate, with a weighted average rate of 7.04 %.

As of March 31, 2026 and June 30, 2025, the weighted-average remaining operating lease term of its existing leases is approximately 9.52 years and 4.51 years, respectively.

The following table sets forth the Company’s minimum long-term lease payments in future periods as of March 31, 2026, which represents the operating lease liabilities on the accompanying balance sheet:

For the three months ending June 30, 2026	Operating lease payments — $ 796,777
For the twelve months ending June 30, 2027	4,804,277
For the twelve months ending June 30, 2028	4,996,179
For the twelve months ending June 30, 2029	5,197,074
For the twelve months ending June 30, 2030	5,202,868
Thereafter	32,039,129
Total lease payments	53,036,304
Less: discount	( 15,192,821	)
Present value of operating lease liabilities	37,843,483
Operating lease liabilities, current portion	( 1,839,557	)
Operating lease liabilities, non-current portion	$ 36,003,926

Operating lease expenses consist of the following:

Operating lease cost	Classification	For the Three Months Ended March 31, 2026	For the Three Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Lease expenses	General, and administrative	$ 1,402,439	$ 63,808
Lease expenses – short term	General, and administrative	2,235	3,041
Total operating lease cost		$ 1,404,674	$ 66,849

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Operating lease cost	Classification	For the Nine Months Ended March 31, 2026	For the Nine Months Ended March 31, 2025
		(Unaudited)	(Unaudited)
Lease expenses	General, and administrative	$ 2,852,736	$ 181,181
Lease expenses – short term	General, and administrative	8,003	10,941
Total operating lease cost		$ 2,860,739	$ 192,122

For the nine months ended March 31, 2026 and 2025, $ 1,513,949 and $ 123,471 of cash were used for operating lease liabilities, respectively.

The Company is in the change in business strategy to engage in dropship arrangement, which has resulted in excess warehouse space to be subleased at below-lease rates. This change in circumstances indicated that the carrying amount of the related right-of-use assets may not be recoverable. The Company performed a recoverability test and determined that the carrying values of these assets were not recoverable from the expected undiscounted cash flows. Accordingly, the Company recognized impairment loss of $ 25,855,427 on its right-of-use assets for the three and nine months ended March 31, 2026, as the carrying amount of these assets exceeded their estimated fair value, as determined based on discounted cash flow.

Note 18 — Commitments and contingencies

Contingencies

From time to time, the Company is a party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in aggregate, are not deemed to be material to the unaudited condensed consolidated financial statements.

On November 22, 2024, a plaintiff filed Semensato v. Foxx Development Holdings Inc., et al., No. 2024-1200 (Del. Ch. Ct.), a class action complaint (“Complaint”) in Delaware Chancery Court against the Company and certain “Individual Defendants” (“Joy” Yi Hua, Haitao Cui, “Jeff” Feng Jiang, “Eva” Yiqing Miao and Edmund R. Miller) (“Action”). The plaintiff seeks a declaration that the waiver provision is invalid, an injunction against the Company and the Individual Defendants to prevent them from attempting to enforce the waiver, attorneys’ fees, and the costs and disbursements of this action. The Company and each of the Individual Defendants deny any and all wrongdoing alleged in the Complaint. However, to avoid the cost and distraction of litigation, the directors of the board of the Company (the “Board”) approved and adopted the Second Amended and Restated Certificate of Incorporation of the Company (the “Amended Charter”) in the best interests of the Company and its stockholders. On March 3, 2025, the plaintiff filed a notice of voluntary dismissal of the Action as moot, which the Court approved by order dated March 4, 2025. On March 18, 2025, the Company paid $ 85,000 (the “Mootness Fee,” inclusive of a $ 500 service award to the plaintiff) to the plaintiff’s counsel to resolve the anticipated application by the plaintiff’s counsel for an award of attorneys’ fees and reimbursement of expenses. In connection with the March 13, 2025 stipulated order closing the case, the Court ordered that the Company provide this notice. The Court has not and will not pass judgment on the amount of the Mootness Fee.

On November 5, 2025, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying it that, for a period of 30 consecutive business days, its 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), the Company has until May 4, 2026 to regain compliance with the MVLS requirement (the “Initial Compliance Period”). For the last 15 consecutive business days, from March 31 through April 21, 2026, the Company’s MVLS has been $ 35,000,000 or greater. Accordingly, the Company has regained compliance with the Rule, and this matter is now closed.

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Risks and Uncertainties

On April 2, 2025, the President of the United States signed Executive Order 14257, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits” (the “Executive Order 14257”), to take action based on the results of certain investigations related to the causes of the U.S.’s large and persistent annual trade deficits in goods. Subsequent to Executive Order 14257, there have been additional executive orders that have, among other actions, effectively suspended the enforcement of certain country-specific tariffs until November 10, 2026, extended from November 10, 2025. The potential for further changes in trade policies, including new tariffs or changes to existing ones, introduces uncertainty regarding the Company’s future costs, revenues, collectability of account receivables, carrying value of inventories, and overall financial performance. The Company monitors these developments closely and will continue to evaluate their potential impact on its operations, financial condition, and results of operations. The ultimate financial impact of these uncertainties is difficult to quantify at this time.

On July 4, 2025, the One Big Beautiful Bill Act, Public Law No. 119021 (“OBBBA”), was signed into law by the President of the United States, which introduced significant and wide-ranging changes to the U.S. tax system. Significant components include restoration of 100 % accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect of the changes includes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $ 31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions including limitations on tax deductions for charitable contributions were also adopted.

The Company is currently assessing the potential impact of this legislation on its future financial position, results of operations, and cash flow. In accordance with U.S. GAAP, the effects will be recognized in the period of enactment.

Note 19 — Income taxes

As of March 31, 2026 and June 30, 2025, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for each of the three and nine months ended March 31, 2026 and 2025 was 0 %. The effective tax rate differs from the statutory tax rate of 21 % primarily due to the valuation allowance on the deferred tax assets

Note 20 — Disaggregated information of revenues

Disaggregated information of revenues by product type is as follows:

	For the Three Months Ended — March 31,		For the Nine Months Ended — March 31,
	2026	2025	2026	2025
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Tablet products	$ 83,301	$ 219,545	$ 412,491	$ 392,660
Mobile phone products	8,002,139	8,868,686	40,875,567	46,571,691
Wearable products	254,039	1,557,962	2,999,116	3,358,138
Subtotal product revenues	8,339,479	10,646,193	44,287,174	50,322,489
App service commission revenue	324,342	690,817	1,314,402	1,606,804
Other services	2,440	55,068	4,558	55,068
Subtotal service revenues	326,782	745,885	1,318,960	1,661,872
Total revenues, net	$ 8,666,261	$ 11,392,078	$ 45,606,134	$ 51,984,361

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Disaggregated information of revenues by business line is as follows:

	For the Three Months Ended — March 31,		For the Nine Months Ended — March 31,
	2026	2025	2026	2025
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Wholesale revenues	$ 7,911,639	$ 9,943,509	$ 42,860,664	$ 49,412,977
E-Commerce revenues	427,840	702,684	1,426,510	909,512
Subtotal product revenues	8,339,479	10,646,193	44,287,174	50,322,489
App service commission revenue	324,342	690,817	1,314,402	1,606,804
Other services	2,440	55,068	4,558	55,068
Subtotal service revenues	326,782	745,885	1,318,960	1,661,872
Total revenues, net	$ 8,666,261	$ 11,392,078	$ 45,606,134	$ 51,984,361

Note 21 — Basic and diluted loss per share

Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted net loss per share attributable to common stockholders adjusts basic loss per share for the potentially dilutive impact of non-participating shares of common stock that are subject to the convertible note, and other securities outstanding. Certain securities may be anti-dilutive and would be excluded from the calculation of diluted loss per share and disclosed separately. Because of the nature of the calculation, particular securities may be dilutive in some periods and anti-dilutive in other periods.

The following table presents the computation of basic and diluted loss per share attributable to common stockholders, for the periods presented:

	For the Three Months Ended March 31, — 2026		2025		For the Nine Months Ended March 31, — 2026		2025
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net loss– basic and diluted EPS	$ ( 36,269,993	)	$ ( 4,084,511	)	$ ( 43,421,349	)	$ ( 4,927,154	)
Basic and diluted weighted average shares outstanding*	6,989,278		7,050,260		6,886,673		5,937,756
Basic and diluted loss per share	$ ( 5.19	)	$ ( 0.58	)	$ ( 6.31	)	$ ( 0.83	)

There were no shares that have a dilutive effect for the three and nine months ended March 31, 2026 and 2025.

The following table outlines dilutive common share equivalents outstanding, which are excluded in the above diluted net loss per share calculation, as the effect of their inclusion would be anti-dilutive or the share equivalents were contingently issuable as of each period presented:

2026	2025	2026	2025
(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Earnout Shares*	-	2,100,000	-	2,100,000
Warrants **	12,145,917	12,145,917	12,145,917	12,145,917
RSUs**	427,944	727,009	427,944	727,009
Total	12,573,861	14,972,926	12,573,861	14,972,926

As described in Note 4 - Reverse recapitalization, the Earnout Shares that are contingently issuable in connection with the Business Combination are subject to vesting based on the Company’s financial performance during the earnout period. The Earnout Shares are excluded from the calculation of basic and diluted weighted-average number of common shares outstanding until vested.

** The Company’s outstanding warrants and RSUs were excluded from the computation of diluted EPS because it has anti-dilutive effect as the company had a net loss during the periods presented.

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Note 22 — Segment information

The Company conducts business as a single operating segment which is based upon the Company’s organizational and management structure, as well as information used by the Company’s CODM to allocate resources and other factors. The accounting policies of the segment are the same as those described in Note 3.

The key measure of segment profitability that the CODM uses to allocate resources and assess performance is consolidated net loss, as reported in the consolidated statements of operations. The following table presents the significant revenue and expense categories of the Company’s single operating segment:

	For The Three Months Ended — March 31,		March 31,
	2026		2025
	(Unaudited)		(Unaudited)
Revenues, net	$ 8,666,261		$ 11,392,078
Less cost of goods sold	10,116,838		10,728,765
Less significant segment expenses:
Commission expenses	80,826		79,616
Marketing consulting expenses	195,892		426,262
Products testing and certification expenses	110,741		211,019
Warranty expenses	34,704		69,208
Marketing and advertising expenses	262,498		164,682
Other selling and marketing expenses	66,090		10,067
Payroll and payroll tax expenses	888,363		888,399
Professional expenses	344,167		441,663
Insurance expenses	161,048		111,284
Credit losses	1,681,606		401,988
Office expenses	80,614		74,883
Rent expenses	1,404,674		66,850
Travel expenses	32,008		44,392
Impairments of right-of-use assets	25,855,427		-
Other general and administrative	71,977		32,355
Other research and development expenses	965,380		851,932
Research and development expenses-related party	-		22,792
Stock-based compensation expenses	279,218		326,588
Other segment items:
Interest expense	2,304,183		1,553,993
Other expense (income), net	-		2,118
Change in fair value of earnout liabilities	-		( 1,032,267	)
Provision for income taxes	-		-
Segment net loss	$ ( 36,269,993	)	$ ( 4,084,511	)

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	For The Nine Months Ended — March 31,		March 31,
	2026		2025
	(Unaudited)		(Unaudited)
Revenues, net	$ 45,606,134		$ 51,984,361
Less cost of goods sold	42,095,364		48,732,206
Less significant segment expenses:
Commission expenses	230,965		421,802
Marketing consulting expenses	582,697		1,233,821
Products testing and certification expenses	349,921		465,350
Warranty expenses	198,995		344,937
Marketing and advertising expenses	630,488		334,673
Other selling and marketing expenses	215,940		83,214
Payroll and payroll tax expenses	2,734,084		2,825,028
Professional expenses	2,066,666		1,449,299
Insurance expenses	499,694		448,170
Credit losses	1,765,169		464,988
Office expenses	245,717		257,609
Rent expenses	2,860,739		192,122
Travel expenses	78,960		172,527
Impairments of right-of-use assets	25,855,427		-
Other general and administrative	140,250		117,452
Other research and development expenses	1,153,296		1,432,153
Research and development expenses-related party	-		91,168
Stock-based compensation expenses	982,337		527,542
Other segment items:
Interest expense	6,319,324		3,005,186
Other expense (income), net	21,450		257
Change in fair value of earnout liabilities	-		( 5,687,989	)
Provision for income taxes	-		-
Segment net loss	$ ( 43,421,349	)	$ ( 4,927,154	)

Note 23 — Subsequent events

The Company evaluated all events and transactions that occurred after March 31, 2026 up through the date the Company issued these unaudited condensed consolidated financial statements. Based on this review, the Company did not identify any subsequent events that would require adjustment or disclosure in the unaudited condensed consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and the other information set forth in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the Securities and Exchange Commission (the “SEC”) on October 15, 2025. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.

Overview

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, 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 “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 Warrants became listed on the Nasdaq under trading symbols “FOXX” and “FOXXW,” respectively.

Together with our Subsidiary, we are a technology innovation firm specializing in the communications sector. Since our establishment in 2017, we have expanded our presence to include various locations throughout the United States, such as San Francisco, CA, Dallas, TX, Atlanta, GA, Los Angeles, CA, Miami, FL, and New York, NY. This expansion enables us to provide sales, retail, distribution, and after-sales support services while simultaneously driving innovation through active research and development efforts aimed at pioneering new customization standards and services.

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-commerce customers from TikTok Shop, which we began our e-commerce operations in March 2024.

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.

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We manage inventory and meet market demand through our build-to-order business model. After customers place purchase orders in bulk with us, we place purchase orders with suppliers to manufacture the products that meet customers’ products specifications and budget requirements. Prior to 2023, we 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 sixteen 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.

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 are cutting down their sales teams in anticipation of the reduced customer base, which affects 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.

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.

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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.

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.

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 Warrants became listed on the Nasdaq Capital Market (“Nasdaq”) under trading symbols “FOXX” and “FOXXW,” respectively.

Accounting Treatment

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.

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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 Old Foxx common stock at $30.00 per share upon the listing of Old 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 Old 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 Old Foxx common stock for the New Bay Notes, (y) 200,882 shares of Old 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 Old 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.

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Nasdaq Listing Update

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”). For the last 15 consecutive business days, from March 31 through April 21, 2026, our MVLS has been $35,000,000 or greater. Accordingly, we have regained compliance with the Rule, and this matter is now closed.

Key Factors that Affect Operating Results

We believe the key factors affecting our financial condition and results of operations include the following:

Retention of Key Management Team Members

One of the key differentiating factors of ours 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.

Investment in technology and talent

We invest significant resources in outsourcing partnerships and dedicate 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.

To maintain and expand our customer base, we must sustain a culture of innovation that aligns with the industry’s evolution. This entails continuously introducing cutting-edge technologies to the market. Our current focus in research and development revolves around bolstering comprehensive communication, storage, and energy solutions, as well as advancing 5G technology. This includes areas such as baseband development, Radio Frequency (RF) layout optimization, Session Initiation Protocol (SIP) integration, and rigorous system testing.

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.

Our ability to expand our products and services and diversify 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 intelligent 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.

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Results of Operations

Comparison for the three months ended March 31, 2026 and 2025

	For the Three Months Ended March 31, — 2026		2025		Change ($)	Change (%)
	(Unaudited)		(Unaudited)
Revenues, net	$ 8,666,261		$ 11,392,078		$ (2,725,817	)	(23.9	)%
Cost of goods sold	10,116,838		10,728,765		(611,927	)	(5.7	)%
Gross (loss) profit	(1,450,577	)	663,313		(2,113,890	)	(318.7	)%
Operating expenses
Selling expense	964,440		1,551,369		(586,929	)	(37.8	)%
General, and administrative expense	2,928,172		1,421,299		1,506,873		106.0	%
Research and development – related party	-		22,792		(22,792	)	(100.0	)%
Research and development	1,085,588		826,532		259,056		31.3	%
Provision of credit losses	1,681,606		401,988		1,279,618		318.3	%
Impairments of right-of-use assets	25,855,427		-		25,855,427		100.0	%
Loss from operations	(33,965,810	)	(3,560,667	)	(30,405,143	)	853.9	%
Other expense, net	(2,304,183	)	(523,844	)	(1,780,339	)	339.9	%
Provision for income tax	-		-		-		-	%
Net loss	(36,269,993	)	(4,084,511	)	(32,185,482	)	788.0	%
Foreign currency translation adjustment	(3,318	)	(412	)	(2,906	)	705.3	%
Comprehensive loss	$ (36,273,311	)	$ (4,084,923	)	$ (32,188,388	)	788.0	%

Revenues

Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $2.7 million, or 23.9%, to approximately $8.7 million for the three months ended March 31, 2026 as compared to $11.4 million for the three months ended March 31, 2025. The decrease of the total revenue was mainly attributable to the decrease in mobile phone products and wearable and other products revenues.

Our revenues from our revenue categories are summarized as follows:

| | For
the Three Months Ended — March
31, 2026 | March
31, 2025 |
| --- | --- | --- |
| | (Unaudited) | (Unaudited) |
| Tablet products | $ 83,301 | $ 219,545 |
| Mobile phone products | 8,002,139 | 8,868,686 |
| Wearable
products and others | 254,039 | 1,557,962 |
| Subtotal product revenues | 8,339,479 | 10,646,193 |
| App service commission revenue | 324,342 | 690,817 |
| Other
services | 2,440 | 55,068 |
| Subtotal
service revenues | 326,782 | 745,885 |
| Total
revenues, net | $ 8,666,261 | $ 11,392,078 |

Tablet product sales were insignificant in our operations for the three months ended March 31, 2026. Revenue from the sales of tablets decreased by approximately $0.1 million, or 62.1%, to approximately $0.1 million for the three months ended March 31, 2026 from $0.2 million for the same period in 2025. Revenue from sales of phones decreased by approximately $0.9 million, or 9.8%, to approximately $8.0 million for the three months ended March 31, 2026 from $8.9 million for the same period in 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 $1.3 million, or 83.7%, to approximately $0.3 million for the three months ended March 31, 2026 from $1.6 million for the three months ended March 31, 2025, as the consumers’ spending power was weakened and the demands of the wearable products were lowered during the three months ended March 31, 2026 period. Revenue from App service commission decreased by approximately $0.4 million, or 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 March 31, 2025, as the sales of phones decreased and the consumers’ spending power was 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 three months ended March 31, 2026.

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Cost of Goods Sold

Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $0.6 million, or 5.7%, to approximately $10.1 million for the three months ended March 31, 2026 as compared to approximately $10.7 million for the three months ended March 31, 2025. The decrease in cost of goods sold is a direct result of a decrease in our revenue. The decrease is also attributable to the decrease in cost of products as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025.

Our cost of goods sold from their revenue categories are summarized as follows:

| | For
the Three Months Ended — March
31, 2026 | March
31, 2025 |
| --- | --- | --- |
| | (Unaudited) | (Unaudited) |
| Tablet products | $ 154,074 | $ 175,135 |
| Mobile phone products | 9,405,459 | 9,117,657 |
| Wearable products and others | 557,255 | 1,415,375 |
| Other
services cost | 50 | 20,598 |
| Total
cost of goods sold | $ 10,116,838 | $ 10,728,765 |

Our cost of goods sold for tablets decreased by approximately $21,000, or 12.0%, to approximately $154,000 for the three months ended March 31, 2026 from approximately $175,000 for the same period in 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 three months ended March 31, 2026 from approximately $9.1 million for the same period in 2025, primarily due to inventory 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 other services was insignificant in our operations for the three months ended March 31, 2026 and 2025.

Gross (Loss) Profit

Our gross (loss) profit decreased by approximately $2.1 million, or 318.7%, to approximately $1.5 million gross loss for the three months ended March 31, 2026, from $0.7 gross profit for the three months ended March 31, 2025.

Our gross (loss) profit from their major revenue categories is summarized as follows:

| | For
the Three Months Ended March 31, — 2026 | | 2025 | | Change | Change (%) | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | (Unaudited) | | | | | |
| Tablet products | | | | | | | | |
| Gross (loss) profit | $ (70,773 | ) | $ 44,410 | | $ (115,183 | ) | (259.4 | )% |
| Gross (loss) profit percentage | (85.0 | )% | 20.2 | % | (105.2 | )% | | |
| Mobile
phone products | | | | | | | | |
| Gross loss | $ (1,403,320 | ) | $ (248,971 | ) | $ (1,154,349 | ) | 463.6 | % |
| Gross loss percentage | (17.5 | )% | (2.8 | )% | (14.7 | )% | | |
| Wearable
products and others | | | | | | | | |
| Gross (loss) profit | $ (303,216 | ) | $ 142,587 | | $ (445,803 | ) | (312.7 | )% |
| Gross (loss) profit percentage | (119.4 | )% | 9.2 | % | (128.5 | )% | | |
| App service
commission revenue | | | | | | | | |
| Gross profit | $ 324,342 | | $ 690,817 | | $ (366,475 | ) | (53.0 | )% |
| Gross profit percentage | 100.0 | % | 100.0 | % | 0.0 | % | | |
| Other services | | | | | | | | |
| Gross profit | $ 2,390 | | $ 34,470 | | $ (32,080 | ) | (93.1 | )% |
| Gross profit percentage | 98.0 | % | 62.6 | % | 35.4 | % | | |
| Total | | | | | | | | |
| Gross (loss) profit | $ (1,450,577 | ) | $ 663,313 | | $ (2,113,890 | ) | (318.7 | )% |
| Gross (loss) profit percentage | (16.7 | )% | 5.8 | % | (22.6 | )% | | |

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For the three months ended March 31, 2026 and 2025, our overall gross (loss) profit percentage was (16.7) % and 5.8%, respectively. The decrease in gross (loss) profit percentage of 22.6% was primarily due to the decrease in gross profit percentage for all products.

Gross (loss) profit percentage of tablets decreased from 20.2% for the three months ended March 31, 2025 to (85.0) % for the same period in 2026. This was primarily due to the decrease of sales of those with higher unit selling prices and lower unit purchase prices, as well as inventory impairment related to slow-moving inventory of approximately $99,000.

Gross loss percentage for mobile phones increased from 2.8% for the three months ended March 31, 2025 to 17.5% for the same period in 2026. This was primarily due to inventory impairment related to slow-moving 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 March 31, 2026 and 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 prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.

Gross profit percentage for other services increased from 62.6% for the three months ended March 31, 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.

Operating Expenses

Total operating expenses increased by approximately $1.2 million, or 28.3%, to approximately $5.4 million for the three months ended March 31, 2026, from approximately $4.2 million for the three months ended March 31, 2025.

Our operating expenses are summarized as follows:

The increase in operating expenses was mainly attributed to the following:

	For the Three Months ended March 31, — 2026	2025	Change ($)	Change (%)
	(Unaudited)	(Unaudited)
Operating expenses
Selling expenses	$ 964,440	$ 1,551,369	$ (586,929	)	(37.8	)%
General and administrative expense	2,928,172	1,421,299	1,506,873		106.0	%
Research and development – related party	-	22,792	(22,792	)	(100.0	)%
Research and development	1,085,588	826,532	259,056		31.3	%
Provision of credit losses	1,681,606	401,988	1,279,618		318.3	%
Impairments of right-of-use assets	25,855,427	-	25,855,427		100.0	%
Total operating expense	$ 32,515,233	$ 4,223,980	$ 28,291,253		669.8	%

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Selling Expenses

Selling expenses decreased approximately $0.6 million, or 37.8%, to approximately $0.1 million for the three months ended March 31, 2026, from approximately $1.6 million for the three months ended March 31, 2025. The decreased selling expenses was mainly attributable to approximately $0.3 million decrease in payroll and payroll related expenses, approximately $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 streamline sales department.

General and Administrative Expenses

General and administrative expenses increased approximately $1.5 million, or 106.0%, to approximately $2.9 million for the three months ended March 31, 2026 from approximately $1.4 million for the three months ended March 31, 2025. The increased general and administrative expense were mainly attributable to the approximately $0.2 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, and approximately $1.3 million increase in rent due to the new warehouse leases that commenced in July 2025 and January 2026.

Research and Development — related party

Research and development (“R&D”) expenses from a related party decreased by approximately $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 March 31, 2025, a related party completed additional 20% of the remaining 5G development project pursuant to an R&D agreement between us and the related party, and we recognized a R&D expense approximately of $23,000 accordingly based on the progression of the R&D project. We did not have this expense for the same period in 2026.

Research and Development

R&D expenses increased by approximately $0.3 million, or 31.3%, from $0.8 million for the three months ended March 31, 2025 to $1.1 million for the same period in 2026. The increase was primarily due to the R&D agreement entered into 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 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

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, net

Our other expense, net is summarized as follows:

| | For
the Three Months ended March 31, — 2026 | | 2025 | | Change | Change
(%) | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | (Unaudited) | | | | | |
| Other expense | | | | | | | | |
| Interest
expense | $ (2,304,183 | ) | $ (1,553,993 | ) | $ (750,190 | ) | 48.3 | % |
| Other
expense, net | - | | (2,118 | ) | 2,118 | | (100.0 | )% |
| Change
in fair value of earnout liabilities | - | | 1,032,267 | | (1,032,267 | ) | (100.0 | )% |
| Total
other expense, net | $ (2,304,183 | ) | $ (523,844 | ) | $ (1,780,339 | ) | 339.9 | % |

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Total other expense, net increased by approximately $1.8 million, or 339.9%, to approximately $2.3 million of other expense, net for the three months ended March 31, 2026, from approximately $0.5 million for the three months ended March 31, 2025. The increase was primarily due to the increase of approximately $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 $1.0 million change in fair value of earnout liabilities as we no longer had earnout liabilities after June 30, 2025.

Provision for income taxes

There was no provision for income taxes in each of the three months ended March 31, 2026 and 2025 as we had made full allowance of our deferred tax assets on net operating losses.

Net loss

Net loss increased by approximately $32.2 million, or 788.0%, to approximately $36.3 million for the three months ended March 31, 2026, from approximately $4.1 million for the three months ended March 31, 2025. Such change was mainly due to the reasons discussed above.

Foreign Currency Translation Adjustment

Changes in foreign currency translation adjustment of approximately $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 March 31, 2026.

Comparison for the nine months ended March 31, 2026 and 2025

	For the Nine Months Ended March 31, — 2026		2025		Change ($)	Change (%)
	(Unaudited)		(Unaudited)
Revenues, net	$ 45,606,134		$ 51,984,361		$ (6,378,227	)	(12.3	)%
Cost of goods sold	42,095,364		48,732,206		(6,636,842	)	(13.6	)%
Gross profit	3,510,770		3,252,155		258,615		8.0	%
Operating expenses
Selling expense	3,008,663		4,393,150		(1,384,487	)	(31.5	)%
General, and administrative expense	8,376,858		4,361,716		4,015,142		92.1	%
Research and development – related party	-		91,168		(91,168	)	(100.0	)%
Research and development	1,585,228		1,550,833		34,395		2.2	%
Provision of credit losses	1,765,169		464,988		1,300,181		279.6	%
Impairments of right-of-use assets	25,855,427		-		25,855,427		100.0	%
Loss from operations	(37,080,575	)	(7,609,700	)	(29,470,875	)	387.3	%
Other (expense) income, net	(6,340,774	)	2,682,546		(9,023,320	)	(336.4	)%
Provision for income tax	-		-		-		-%
Net loss	$ (43,421,349	)	$ (4,927,154	)	$ (38,494,195	)	781.3	%
Foreign currency translation adjustment	(12,109	)	(412	)	(11,697	)	2,839.1	%
Comprehensive loss	(43,433,458	)	(4,927,566	)	(38,505,892	)	781.4	%

Revenues

Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $6.4 million, or 12.3%, to approximately $45.6 million for the nine months ended March 31, 2026 as compared to $52.0 million for the nine months ended March 31, 2025. The decrease of the total revenue was mainly attributable to the decrease in mobile phone products revenues, which accounted for 90% of our sales.

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Our revenues from our revenue categories are summarized as follows:

| | For
the Nine Months Ended — March
31, 2026 | March
31, 2025 |
| --- | --- | --- |
| | (Unaudited) | (Unaudited) |
| Tablet products | $ 412,491 | $ 392,660 |
| Mobile phone products | 40,875,567 | 46,571,691 |
| Wearable
products and others | 2,999,116 | 3,358,138 |
| Subtotal product revenues | 44,287,174 | 50,322,489 |
| App service commission revenue | 1,314,402 | 1,606,804 |
| Other
services | 4,558 | 55,068 |
| Subtotal
service revenues | 1,318,960 | 1,661,872 |
| Total
revenues, net | $ 45,606,134 | $ 51,984,361 |

Tablet product sales were insignificant in our operations for the nine months ended March 31, 2026. Revenue from the sales of tablets increased by approximately $19,000, or 5.1%, to approximately $412,000 for the nine months ended March 31, 2026 from $393,000 for the same period in 2025. Revenue from sales of phones decreased by approximately $5.7 million, or 12.2%, to approximately $40.9 million for the nine months ended March 31, 2026 from $46.6 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 10.7%, to approximately $3.0 million for the nine months ended March 31, 2026 from $3.4 million for the nine months ended March 31, 2025, as the consumers’ spending power was weakened and the demands of the wearable products were lowered during the nine months ended March 31, 2026 period. Revenue from App service commission decreased by approximately $0.3 million, or 18.2%, to approximately $1.3 million for the nine months ended March 31, 2026 from $1.6 million for the nine months ended March 31, 2025, as the sales of phones decreased the consumers’ spending power was 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 nine months ended March 31, 2026.

Cost of Goods Sold

Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $6.6 million, or 13.6%, to approximately $42.1 million for the nine months ended March 31, 2026 as compared to $48.7 million for the nine months ended March 31, 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 from their revenue categories are summarized as follows:

| | For
the Nine Months Ended — March
31, 2026 | March
31, 2025 |
| --- | --- | --- |
| | (Unaudited) | (Unaudited) |
| Tablet products | $ 445,400 | $ 312,704 |
| Mobile phone products | 38,387,419 | 45,450,285 |
| Wearable products and others | 3,262,005 | 2,948,619 |
| Other
services cost | 540 | 20,598 |
| Total
cost of goods sold | $ 42,095,364 | $ 48,732,206 |

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Our cost of goods sold for tablets increased by approximately $0.1 million, or 42.4%, to approximately $0.4 million for the nine months ended March 31, 2026 from approximately $0.3 million for the same period in 2025. Cost of goods sold for mobile phone products decreased by approximately $7.1 million, or 15.5%, to approximately $38.4 million for the nine months ended March 31, 2026 from approximately $45.5 million for the same period in 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 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 by approximately $0.4 million, or 10.6%, to approximately $3.3 million for the nine months ended March 31, 2026 from $2.9 million for the same period in 2025, which is primarily due to inventory impairment related to slow-moving inventory of approximately $0.8 million. Cost of other services was insignificant in our operations for the nine months ended March 31, 2026 and 2025.

Gross Profit

Our gross profit increased by approximately $0.2 million, or 8.0%, to approximately $3.5 million for the nine months ended March 31, 2026, from $3.3 for the nine months ended March 31, 2025.

Our gross profit from their major revenue categories is summarized as follows:

| | For
the Nine Months Ended March 31, — 2026 | | 2025 | Change | Change (%) | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | (Unaudited) | | | | |
| Tablet products | | | | | | | |
| Gross (loss) profit | $ (32,909 | ) | $ 79,956 | $ (112,865 | ) | (141.2 | )% |
| Gross (loss) profit percentage | (8.0 | )% | 20.4 % | (28.3 | )% | | |
| Mobile
phone products | | | | | | | |
| Gross profit | $ 2,488,148 | | $ 1,121,406 | $ 1,366,742 | | 121.9 | % |
| Gross profit percentage | 6.1 | % | 2.4 % | 3.7 | % | | |
| Wearable
products and others | | | | | | | |
| Gross (loss) profit | $ (262,889 | ) | $ 409,519 | $ (672,408 | ) | (164.2 | )% |
| Gross(loss) profit percentage | (8.8 | )% | 12.2 % | (21.0 | )% | | |
| App service
commission revenue | | | | | | | |
| Gross profit | $ 1,314,402 | | $ 1,606,804 | $ (292,402 | ) | (18.2 | )% |
| Gross profit percentage | 100.0 | % | 100.0 % | 0.0 | % | | |
| Other services | | | | | | | |
| Gross profit | $ 4,018 | | $ 34,470 | $ (30,452 | ) | (88.3 | )% |
| Gross profit percentage | 88.2 | % | 62.6 % | 25.6 | % | | |
| Total | | | | | | | |
| Gross profit | $ 3,510,770 | | $ 3,252,155 | $ 258,615 | | 8.0 | % |
| Gross profit percentage | 7.7 | % | 6.3 % | 1.4 | % | | |

For the nine months ended March 31, 2026 and 2025, our overall gross profit percentage was 7.7% and 6.3%, respectively. The increase in gross profit percentage of 1.4% was primarily due to the increase in gross profit percentage for mobile phone products, which accounted for 71% of our gross profit.

Gross (loss) profit percentage of tablets decreased from 20.4% for the nine months ended March 31, 2025 to (8.0) % for the same period in 2026. This was primarily due to the inventory impairment related to slow-moving inventory of approximately $0.1 million.

Gross profit percentage for mobile phones increased from 2.4% for the nine months ended March 31, 2025 to 6.1% for the same period in 2026. This was primarily due to the increasing sales of new phone models with higher gross profit margins and the reduction of shipping and tariff costs as 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.

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Gross (loss) profit percentage for wearable products and others decreased from 12.2% for the nine months ended March 31, 2025 to (8.8) % 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 $0.8 million.

For the nine months ended March 31, 2026 and 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 prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.

Gross profit percentage for other services increased from 62.6% for the nine months ended March 31, 2025 to 88.2% for the same period in 2026. Gross profit percentage for other services was insignificant in our operations for the nine months ended March 31, 2026 and 2025.

Operating Expenses

Total operating expenses increased by approximately $2.6 million, or 24.3%, to approximately $13.5 million for the nine months ended March 31, 2026, from approximately $10.9 million for the nine months ended March 31, 2025.

Our operating expenses are summarized as follows:

	For the Nine Months ended March 31, — 2026	2025	Change ($)	Change (%)
	(Unaudited)	(Unaudited)
Operating expenses
Selling expenses	$ 3,008,663	$ 4,393,150	$ (1,384,487	)	(31.5	)%
General and administrative expense	8,376,858	4,361,716	4,015,142		92.1	%
Research and development – related party	-	91,168	(91,168	)	(100.0	)%
Research and development	1,585,228	1,550,833	34,395		2.2	%
Provision of credit losses	1,765,169	464,988	1,300,181		279.6	%
Impairments of right-of-use assets	25,855,427	-	25,855,427		100.0	%
Total operating expense	$ 40,591,345	$ 10,861,855	$ 29,729,490		273.7	%

The increase in operating expenses was mainly attributed to the following:

Selling Expenses

Selling expenses decreased approximately $1.4 million, or 31.5%, to approximately $3.0 million for the nine months ended March 31, 2026, from approximately $4.4 million for the nine months ended March 31, 2025. The decreased selling expenses was mainly attributable to approximately $1.1 million decrease in commission, payroll and payroll related expenses and approximately $0.7 million decrease in consulting fees during the six months ended December 31, 2025, as we reduced salespersons and consultants to reduce expenses and streamline sales department. The decrease was offset by approximately $0.1 million increase in stock-based compensation as we granted restricted stock units in November 2024 to our sales team members under employee incentive plan, and approximately $0.3 million increased in advertising and marketing expenses primarily due to the increased marketing investment in e-commerce channels.

General and Administrative Expenses

General and administrative expenses increased approximately $4.0 million, or 92.1%, to approximately $8.4 million for the nine months ended March 31, 2026 from approximately $4.4 million for the nine months ended March 31, 2025. The increased general and administrative expense were mainly attributable to the approximately $0.6 million increase in professional expense as we became a public company and incurred additional capital market and legal consulting fees, approximately $0.6 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 $2.7 million increase in rent due to the new warehouse leases that commenced in July 2025 and January 2026, and approximately $0.2 million increase in stock-based compensation expenses as we granted restricted stock units in November 2024 to our general and administrative team members under employee incentive plan.

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Research and Development — related party

Research and development (“R&D”) expenses from a related party decreased by approximately $91,000, 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 nine months ended March 31, 2025, a related party completed additional 40% of the remaining 5G development project pursuant to a R&D agreement between us and the related party, and we recognized a R&D expense approximately of $91,000 accordingly based on the progression of the R&D project. We did not have this expense for the same period in 2026.

Research and Development

R&D expenses were $1.6 million for the nine months ended March 31, 2026, remaining consistent with the same period in 2025.

Provision of credit losses

Provision of credit losses increased by approximately $1.3 million, or 279.6%, from $0.5 million for the nine months ended March 31, 2025 to approxmiamtley $1.8 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 customers and customer groups.

Impairments of right-of-use assets

Impairments of right-of-use assets increased by approximately $25.9 million, or 100.0%, from $0 for the nine 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, net

Our other expense, net is summarized as follows:

| | For
the Nine Months ended March 31, — 2026 | | 2025 | | Change | Change
(%) | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | (Unaudited) | | | | | |
| Other (expense) income | | | | | | | | |
| Interest expense | $ (6,319,324 | ) | $ (3,005,186 | ) | $ (3,314,138 | ) | 110.3 | % |
| Other expense, net | (21,450 | ) | (257 | ) | (21,193 | ) | 8,246.3 | % |
| Change
in fair value of earnout liabilities | - | | 5,687,989 | | (5,687,989 | ) | (100.0 | )% |
| Total
other (expense) income, net | $ (6,340,774 | ) | $ 2,682,546 | | $ (9,023,320 | ) | (336.4 | )% |

Total other (expense) income, net decreased by approximately $9.0 million, or 336.4%, to approximately $6.3 million of other expense, net for the nine months ended March 31, 2026, from approximately $2.7 million of other income, net for the nine months ended March 31, 2025. The decrease was primarily due to the increase of approximately $3.3 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 $5.7 million of change in fair value of earnout liabilities as we no longer had earnout liabilities after June 30, 2025.

Provision for income taxes

There was no provision for income taxes for each of the nine months ended March 31, 2026 and 2025 as we had made full allowance of our deferred tax assets on net operating losses.

Net Loss

Net loss increased by approximately $38.5 million, or 781.3%, to approximately $43.4 million for the nine months ended March 31, 2026, from approximately $4.9 million for the nine months ended March 31, 2025. Such change was mainly due to the reasons discussed above.

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Foreign Currency Translation Adjustment

Changes in foreign currency translation adjustment of approximately $12,000 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 nine months ended March 31, 2026.

Liquidity and Capital Resources

In assessing liquidity, we monitor and analyses cash on-hand and operating and capital expenditure commitments. Our liquidity needs are to meet working capital requirements, operating expenses, and capital expenditure obligations. Debt financing in the form of convertible promissory note and cash generated from operations have been utilized to finance working capital requirements.

As of March 31, 2026, we had cash and cash equivalents of approximately $3.2 million, while we had working capital deficit of approximately $24.9 million and accumulated deficit of approximately $63.5 million. During the nine months ended March 31, 2026, we had net loss of approximately $43.4 million.

If we are unable to generate sufficient funds to finance the working capital requirements within the normal operating cycle of a twelve-month period from the date of the unaudited condensed consolidated financial statements are issued, we may have to consider supplementing our available sources of funds through the following sources:

● Other available sources of financing from banks, other financial institutions or private lenders;

● Financial support and credit guarantee commitments from our related parties; and

● Equity financing.

Our management has determined that the factors discussed above have raised substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

The following summarizes the key components of cash flows for the nine months ended March 31, 2026 and 2025.

| | For
the Nine Months Ended March 31, — 2026 | 2025 | | |
| --- | --- | --- | --- | --- |
| | (Unaudited) | (Unaudited) | | |
| Net
cash provided by (used in) operating activities | $ 1,336,941 | $ | (4,653,662 | ) |
| Net
cash provided by (used in) investing activities | 8,826 | | (40,236 | ) |
| Net
cash (used in) provided by financing activities | (17,988 | ) | 7,894,208 | |
| Effect
of exchange rate changes | (12,758 | ) | 2,297 | |
| Net
change in cash and cash equivalents | $ 1,315,021 | $ | 3,202,607 | |

Operating activities

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 receivable aligned with the decrease of sales and ongoing collection of outstanding receivables, (iv) approximately $1.9 million increase in other payables and accrued liabilities as we committed to repaying supply chain finance interests and the recognition of obligations to pay R&D expenses under milestone-based installments pursuant to the R&D agreement entered into in January 2026, (v) approximately $1.1 million decrease in inventories as we engaged in dropship arrangement beginning in July 2025 where products were shipped directly to our customers rather than stored in our warehouse as inventory, (vi) approximately $0.4 million decrease in contract assets primarily due to the progression of historical purchase orders into production and the sale of inventory, (vii) approximately $0.6 million decrease in prepaid expenses and other current assets due to the collection of prepayment refund from canceled purchase orders and the utilization of prepaid rent following the commencement of warehouse leases in July 2025 and January 2026, and (viii) approximately $0.1 million increase in contract liabilities. The cash outflow was offset by (ix) approximately $43.4 million net loss, (x) approximately $1.5 million payment in operating lease liabilities as we commenced our warehouse leases in July 2025 and January 2026, and (xi) approximately $0.3 million decrease in other payable – related parties primarily due to the repayment of unconverted working capital loan balance.

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Net cash used in operating activities was approximately $4.7 million for the nine months ended March 31, 2025 and was primarily attributable to (i) approximately $4.9 million net loss, (ii) approximately $14.9 million increased in inventories because we stored more inventories to meet the demand of our anticipated sales orders, (iii) approximately $7.4 million increased in accounts receivable due to the increase of credit sales during the period, (iv) non-cash expenses of approximately $5.7 million, which primarily attributed to the change in fair value of earnouts, (v) approximately $1.0 million increased in prepaid expenses and other current assets due to our prepaid rent payment in connection with our warehouse lease to be commenced in February 2025, (vi) approximately $1.1 million increased in security deposit because we rented more office and warehouse space, (vii) approximately $0.3 million decreased in tax payable of ACAC due to the payment of tax at business combination, and (viii) approximately $0.4 million decrease in contract liabilities due to purchase of more inventories with vendors to meet customer demand. The cash outflow was offset by (ix) approximately $28.0 million increased in accounts payable – supplier financing due to purchase of more inventories with vendors to meet customer demand, (x) approximately $2.0 million increased in other payables and accrued liabilities mainly due to accrued professional fees that associated with business expansion, such as consulting fees, testing fees and legal fees, (xi) approximately $0.5 million increase in stock compensation due to restricted stock units granted to our employees, consultants and independent director under employee incentive plan, and (xii) approximately $0.5 million provision for credit losses due to the increasing risk of uncollectable accounts from one customer.

Investing activities

Net cash provided by investing activities was approximately $9,000 for the nine months ended March 31, 2026, attributable to the proceeds from sale of equipment.

Net cash used in investing activities was approximately $40,000 for the nine months ended March 31, 2025, attributable to approximately $68,000 purchase of some equipment for warehouse and an automobile for our business uses and offset by approximately $28,000 proceeds from sale of the automobile.

Financing activities

Net cash used in financing activities was approximately $18,000 for the nine months ended March 31, 2026, mainly attributable to the principal payments of long-term loan.

Net cash provided by financing activities was approximately $7.9 million for the nine months ended March 31, 2025, mainly attributable to approximately $19.7 million proceeds from the reverse recapitalization and $9.0 million proceeds from issuance of convertible promissory notes, proceeds of approximately $0.1 million from issuance of common stock through exercise of warrant, offset by the payment of redeeming shareholders in connection with the business combination of approximately $20.5 million, the repayment of short-term loans of approximately $0.3 million and approximately $0.1 million in payments of deferred transaction costs.

Off-Balance Sheet Arrangements

As of March 31, 2026, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our members.

Critical Accounting Estimates

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that are critical to the preparation of the unaudited condensed consolidated financial statements. Certain accounting estimates are particularly sensitive because of their significance to the unaudited condensed consolidated financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe that the critical accounting estimates, assumptions, and judgments that have the most significant impact on our unaudited condensed consolidated financial statements are described below.

Allowance for Credit Losses

In establishing the required allowance for credit loss accounts, we consider historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history and financial condition of the customers. Management reviews its receivables on a regular basis to determine if the allowance for credit loss accounts is adequate and adjusts the allowance when necessary. Delinquent account balances are written off against allowance for credit loss accounts after management has determined that the likelihood of collection is not probable. The allowance for credit losses is based on a review of specifically identified customer accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the collectability of accounts receivable within each pool based on historical experience, current payment practices and current economic trends based on our expectations over the expected life of the receivable, which is generally ninety days or less. With our accounts receivable balances, management would estimate its expected credit losses using an aging method with a baseline reserve percentage with the additional consideration of current industry and economic trend. Although actual losses have not differed materially from our previous estimates, future losses could differ from our current estimates. As of March 31, 2026 and June 30, 2025, $1,848,648 and $595,907, respectively, of allowance for credit losses of accounts receivable was recorded, and the Company had net accounts receivable of $4,112,151 and $6,786,792, respectively.

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Income Taxes

We record deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss carryforwards, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes compared to the amounts used for income tax purposes. We regularly review our deferred tax assets for recoverability with consideration for such factors as historical losses, projected future taxable income, and the expected timing of the reversals of existing temporary differences. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes the deferred tax assets, based largely on the history of tax losses, warrant a full valuation allowance based on the weight of available negative evidence. Currently, the key factor in our assumption of providing 100% valuation allowance was purely based on our historical operating losses. Once we begin generating profit, we will re-evaluate whether providing 100% valuation allowance is appropriate or if we can reassess such number.

Inventory Impairment

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. These estimates require significant judgement and are based upon past sales experience, forecasts for future demand, market conditions, and other relevant factors. During the three months ended March 31, 2026 and 2025, inventory write-downs of $3,092,282 and $0, respectively, were recorded based on management’s estimates. During the nine months ended March 31, 2026 and 2025, inventory write-down s of $4,663,144 and $0, respectively, were recorded based on management’s estimates.

When inventories are written down to net realizable value, they are not marked up subsequently based on changes in underlying facts and circumstances.

Impairment of long-lived assets

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. Recoverability is assessed by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to result from the use and eventual disposition of the assets. The right-of-use assets were determined to be impaired and the impairment recognized was the excess of the carrying amount over the fair value of the assets. Fair value was determined by the discounted cash flow method. The approach for determining and measuring impairment in long-lived asset groups is to exclude operating lease liabilities from the asset group. The discount rate used in the estimate of discounted cash flows is 8.70%, consistent with our incremental borrowing rate as of January 1, 2026, because from market participant and sublease standpoint as the interest rate in the market, our credit environment and market spreads have held steady with no change since January 1, 2026. These estimates are subject to significant uncertainty, particularly with respect to assumptions used in forecasting future cash flows. Changes in these assumptions could materially affect the estimated fair value and the amount of impairment recognized. For example, a decrease in projected sublease income or occupancy rates could result in additional impairment charges. Management believes the assumptions and methodology used are reasonable and consistent; however, these estimates may change in the near term as market conditions, sublease arrangements, and the Company’s business strategy evolve. During the three months ended March 31, 2026 and 2025, the Company recognized approximately $25.9 million and $0 impairment of long-lived assets, respectively. During the nine months ended March 31, 2026 and 2025, the Company recognized approximately $25.9 million and $0 impairment of long-lived assets, respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1a. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None .

Item 6. Exhibits

| Exhibit
No. | Description | Incorporated
by Reference — Form | File
No. | Exhibit No. | Filing
Date |
| --- | --- | --- | --- | --- | --- |
| 3.1 | Certificate
of Incorporation of the Registrant. | S-4/A | 333-280613 | 3.3 | July 19, 2024 |
| 3.2 | Amended
and Restated Certificate of Incorporation of the Registrant. | 8-K | 001-42285 | 3.2 | October 2, 2024 |
| 3.3 | Certificate
of Amendment to the Amended and Restated Certificate of Incorporation, dated December 29, 2025. | 8-K | 001-42285 | 3.1 | December 29, 2025 |
| 3.4 | Bylaws
of the Registrant. | 8-K | 001-42285 | 3.3 | October 2, 2024 |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer | | | | |
| 31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer | | | | |
| 32.1 | Section 1350 Certification of Chief Executive Officer | | | | |
| 32.2 | Section 1350 Certification of Chief Financial Officer | | | | |

101.INS*	Inline XBRL Instance Document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase
Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase
Document.
104*	Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).

*	filed herewith
**	furnished herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| /s/
Greg Foley |
| --- |
| Greg
Foley |
| Chief Executive Officer |
| (Principal Executive
Officer) |

| Date:
May 20, 2026 |
| --- |
| “Joy”
Yi Hua |
| Chairwoman and Chief
Financial Officer |
| (Principal Financial
Officer) |

Field: Page; Sequence: 49; Options: Last

Field: /Page

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Foxx Development Holdings Inc. Interim / Quarterly Report 2026

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