Foxx Development Holdings Inc

Previous wording

Foxx Development Holdings Inc.(“we,” “our”, “us”, or the “Company”)was incorpo rated 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”.

Current wording

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”.

Previous wording

For the three months ended September 30, 2024, our sales went back to our historical level, as we have added two new customers during the period.

Current wording

For the three months ended December 31, 2024, our sales went back to our historical level, as we have added three new customers during the period.

Previous wording

Tablet product sales were insignificant in our operations for the three months ended September 30, 2024. Revenue from the sales of tablets increased by approximately $5,000, or 100.0%, to approximately $5,000 for the three months ended September 30, 2024 from $0 for the same period in 2023. Revenue from sales of phones increased by approximately $23.1 million, or 100.0%, to approximately $23.1 million for the three months ended September 30, 2024 from $0 for the same period in 2023 as we rolled out some new phone products beginning in January 2024 and the sales from two new wholesale customers who aggregately accounted for 88% of our sales.

Current wording

Tablet product sales were insignificant in our operations for the three months ended December 31, 2024. Revenue from the sales of tablets decreased by approximately $0.4 million, or 69.5%, to approximately $0.2 million for the three months ended December 31, 2024 from $0.6 million for the same period in 2023. Revenue from sales of phones, which accounts for 85% of total revenue, increased by approximately $14.5 million, or 5,172.6%, to approximately $14.8 million for the three months ended December 31, 2024 from $0.3 million for the same period in 2023 as we rolled out some new phone products beginning in January 2024 and the sales from two new wholesale customers who aggregately accounted for 84% of our sales. Revenue from sales of wearable products, which was new for the three months ended December 31, 2024, increased by approximately $1.8 million, or 100.0%, to approximately $1.8 million for the three months ended December 31, 2024 from $0 for the same period in 2023 as we rolled out some new wearable products beginning in October 2024 and the sales from one new wholesale customers who aggregately accounted for 10% of our sales. Revenue from App service commission increased by approximately $0.7 million, or 100.0%, to approximately $0.7 million for the three months ended December 31, 2024 from $0 for the same period in 2023 as we started to generate income by providing installation of App service to our partners on our mobile devices and procure the distribution of these devices to the end users beginning in July 2024.

Previous wording

Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold increased by approximately $22.7 million, or 100.0%, to approximately $22.7 million for the three months ended September 30, 2024 as compared to $0 for the three months ended September 30, 2023. The increase in cost of goods sold is a direct result of an increase in our revenue, consistent with the acquisition of our two new wholesale customers as discussed above for the three months ended September 30, 2024 as compared to the same period in 2023.

Current wording

Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold increased by approximately $14.6 million, or 1,985.2%, to approximately $15.3 million for the three months ended December 31, 2024 as compared to $0.7 million for the three months ended December 31, 2023. The increase in cost of goods sold is a direct result of an increase in our revenue, consistent with the acquisition of our two new wholesale customers and new product line as discussed above for the three months ended December 31, 2024 as compared to the same period in 2023.

Previous wording

Our cost of goods sold for tables increased by approximately $5,000, or 100.0%, to approximately $5,000 for the three months ended September 30, 2024 from $0 for the same period in 2023. Cost of goods sold for mobile phone products increased by approximately $22.7 million, or 100.0%, to approximately $22.7 million for the three months ended September 30, 2024 from $0 for the same period in 2023, which is consistent with the direct result of an increase in our revenue.

Current wording

Our cost of goods sold for tables decreased by approximately $0.4 million, or 72.5%, to approximately $0.1 million for the three months ended December 31, 2024 from $0.5 million for the same period in 2023. Cost of goods sold for mobile phone products increased by approximately $13.4 million, or 5,335.5%, to approximately $13.6 million for the three months ended December 31, 2024 from $0.3 million for the same period in 2023, which is consistent with the direct result of an increase in our revenue. Cost of goods sold for wearable products increased by approximately $1.5 million, or 100.0%, to approximately $1.5 million for the three months ended December 31, 2024 from $0 for the same period in 2023.

Previous wording

Our gross profit increased by approximately $0.4 million, or 100.0%, to approximately $0.4 million for the three months ended September 30, 2024, from $0 for the three months ended September 30, 2023.

Current wording

Our gross profit increased by approximately $2.1 million, or 2,099.8%, to approximately $2.2 million for the three months ended December 31, 2024, from $0.1 million for the three months ended December 31, 2023.

Previous wording

Total operating expenses increased by approximately $1.7 million, or 331.2%, to approximately $2.2 million for the three months ended September 30, 2024 from approximately $0.5 million for the three months ended September 30, 2023.

Current wording

Total operating expenses increased by approximately $3.7 million, or 549.1%, to approximately $4.4 million for the three months ended December 31, 2024 from approximately $0.7 million for the three months ended December 31, 2023.

Previous wording

Selling expenses increased, approximately $1.0 million, or 483.4%, to approximately $1.2 million for the three months ended September 30, 2024, from approximately $0.2 million for the three months ended September 30, 2023. The increased selling expenses was mainly attributable to approximately $0.6 million increase in commission, payroll and payroll related expense as we recruited and hired more salespersons to our team during the three months ended September 30, 2024, approximately $0.2 million increase in consulting fees, as the Company engaged additional sales consultant to enhance our sales efforts, approximately $0.1 million increase in warranty expenses due to the increase in sales, and approximately $0.1 million increase in sampling, testing and certification expenses, which all directly related with boosting the brand awareness, adding new product models, and to attract more business opportunities in the electronic devices market during the three months ended September 30, 2024.

Current wording

Selling expenses increased, approximately $1.4 million, or 1,056.0%, to approximately $1.6 million for the three months ended December 31, 2024, from approximately $0.2 million for the three months ended December 31, 2023. The increased selling expenses was mainly attributable to approximately $0.6 million increase in commission, payroll and payroll related expense as we recruited and hired more salespersons to our team during the three months ended December 31, 2024, approximately $0.3 million increase in consulting fees, as the Company engaged additional sales consultant to enhance our sales efforts, approximately $0.2 million increase in warranty expenses due to the increase in sales, and approximately $0.2 million increase in sampling, testing and certification expenses, and advertising and marketing, which all directly related with boosting the brand awareness, adding new product models, and to attract more business opportunities in the electronic devices market during the three months ended December 31, 2024.

Previous wording

General and administrative expenses increased approximately $0.7 million, or 216.9%, to approximately $1.0 million for the three months ended September 30, 2024 from approximately $0.3 million for the three months ended September 30, 2023. The increased general and administrative expense were mainly attributable to the approximately $0.2 million increase in non-capitalized initial public offering related expense on audit and accounting fees, approximately $0.3 million increase in salary and wages as we made more new hires during the three months ended September 30, 2024, and approximately $0.2 million increase in other general and administrative miscellaneous expenses, such as rent expense, travel expense, and office expense due to increased expenses in the increased of our operations. We anticipate a continued rise in our SG&A as we persist in executing our business expansion plan and integrating IoT-enabled devices alongside our cloud platform to streamline operations in 2024 and 2025.

Current wording

General and administrative expenses increased approximately $1.4 million, or 254.6%, to approximately $1.9 million for the three months ended December 31, 2024 from approximately $0.5 million for the three months ended December 31, 2023. The increased general and administrative expense were mainly attributable to the approximately $0.7 million increase in professional expense on audit, legal and accounting fees as we became a public company, approximately $0.3 million increase in salary and wages as we made more new hires during the three months ended December 31, 2024, and approximately $0.4 million increase in other general and administrative miscellaneous expenses, such as insurance, rent expense, travel expense, and office expense due to increased expenses in the increased of our operations. We anticipate a continued rise in our G&A as we persist in executing our business expansion plan and integrating IoT-enabled devices alongside our cloud platform to streamline operations in 2025.

Previous wording

Research and development (“R&D”) expenses from a related party increased by approximately $23,000, or 100.0%, where the increase was primarily due to an R&D project began in 2024. During the three months ended September 30, 2024, a related party completed additional 10% 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 $23,000 accordingly based on the progression of the R&D project. We expect our R&D expenses will continue to go up as we will need to development our IoT and MVNO capabilities products and to finish our development of the 5G products in 2024 and 2025.

Current wording

Research and development (“R&D”) expenses from a related party increased by approximately $46,000, or 100.0%, where the increase was primarily due to an R&D project began in 2024. During the three months ended December 31, 2024, a related party completed additional 20% 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 $46,000 accordingly based on the progression of the R&D project. We expect our R&D expenses will continue to go up as we will need to development our IoT and MVNO capabilities products and to finish our development of the 5G products in 2025.

Previous wording

Our other expense, net is summarized as follows:

Current wording

Our other income (expense), net is summarized as follows:

Previous wording

Total other expense, net increased by approximately $0.4 million, or 1,202.8%, to approximately $0.5 million for the three months ended September 30, 2024, from approximately $35,000 for the three months ended September 30, 2023. The increase was primarily due to interest expenses incurred related to three convertible promissory notes issued in November 2023, March 2024 and September 2024, the interest expenses incurred related to the financing offered by one of our vendors based upon the timing of our payment to their accounts payable, and the change in fair value of earnout liabilities in connection with the Business Combination.

Current wording

Total other income (expense), net increased by approximately $3.7 million, or 6,482.2%, to approximately $3.7 million other income for the three months ended December 31, 2024, from approximately $57,000 other expense for the three months ended December 31, 2023. The increase was primarily due to the change in fair value of earnout liabilities in connection with the Business Combination and offset by the interest expenses incurred related to the financing offered by one of our vendors based upon the timing of our payment to their accounts payable.

Previous wording

The provision for income taxes are $0 for each of the three months ended September 30, 2024 and 2023 as we had made full allowance of our deferred tax assets on net operating losses.

Current wording

The provision for income taxes is $0 for each of the three months ended December 31, 2024 and 2023 as we had made full allowance of our deferred tax assets on net operating losses.

Previous wording

Net loss increased by approximately $1.7 million, or 314.5%, to approximately $2.2 million of net loss for the three months ended September 30, 2024, from approximately $0.5 million net loss for the three months ended September 30, 2023. Such change was mainly due to the reasons discussed above.

Current wording

Net income (loss) decreased by approximately $2.0 million, or 322.3%, to approximately $1.4 million of net income for the three months ended December 31, 2024, from approximately $0.6 million of net loss for the three months ended December 31, 2023. Such change was mainly due to the reasons discussed above.

Previous wording

Our revenue primarily derived from sales of electronic products. The total revenues increased by approximately $23.1 million, or 100.0%, to approximately $23.1 million for the three months ended September 30, 2024 as compared to $0 for the three months ended September 30, 2023. The increase of the total revenue was mainly attributable to the sales from two new wholesale customers who aggregately accounted for 88% of our sales.

Current wording

Our revenue primarily derived from sales of electronic products. The total revenues increased by approximately $39.8 million, or 4,774.0%, to approximately $40.6 million for the six months ended December 31, 2024 as compared to $0.8 million for the six months ended December 31, 2023. The increase of the total revenue was mainly attributable to the sales from three new wholesale customers who aggregately accounted for 86% of our sales.

Previous wording

As of September 30, 2024, we had cash and cash equivalents of approximately $9.2 million, while we had working capital deficit of approximately $0.4 million and accumulated deficit of approximately $13.3 million. During the three months ended September 30, 2024, we had net loss of approximately $2.2 million and net operating cash outflow of approximately $0.2 million.

Current wording

As of December 31, 2024, we had cash and cash equivalents of approximately $3.9 million, while we had accumulated deficit of approximately $11.9 million. During the six months ended December 31, 2024, we had net loss of approximately $0.8 million and net operating cash outflow of approximately $4.5 million.

Previous wording

The following summarizes the key components of cash flows for the three months ended September 30, 2024 and 2023.

Current wording

The following summarizes the key components of cash flows for the six months ended December 31, 2024 and 2023.

Previous wording

Net cash used in operating activities was approximately $0.2 million for the three months ended September 30, 2024 and was primarily attributable to (i) approximately $2.2 million net loss, (ii) approximately $12.1 million increased in accounts receivable due to the increase of credit sales during the period, (iii) approximately $2.8 million increased in inventories because we stored more inventories to meet the demand of our anticipated sales orders, (iv) approximately $0.6 million increased in security deposit because we rented more office space, (v) approximately $0.5 million decreased in contract liabilities aligned with the increase of inventory, and (vi) approximately $0.2 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. The cash outflow was offset by (vii) non-cash expenses of approximately $0.3 million, which includes depreciation, accrued interest expenses incurred from the convertible notes, change in fair value of earnouts and amortization of operating right-of-use assets, (viii) approximately $17.9 million increased in accounts payable due to purchase of more inventories with vendors to meet customer demand, and (ix) approximately $0.2 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.

Current wording

Net cash used in operating activities was approximately $4.5 million for the six months ended December 31, 2024 and was primarily attributable to (i) approximately $0.8 million net loss, (ii) approximately $14.0 million increased in inventories because we stored more inventories to meet the demand of our anticipated sales orders, (iii) approximately $7.5 million increased in accounts receivable due to the increase of credit sales during the period, (iv) non-cash expenses of approximately $4.1 million, which primarily attributed to the change in fair value of earnouts, (v) approximately $0.9 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 $0.6 million increased in security deposit because we rented more office space, and (vii) approximately $0.3 million decreased in tax payable of ACAC due to the payment of tax at business combination. The cash outflow was offset by (viii) approximately $22.8 million increased in accounts payable due to purchase of more inventories with vendors to meet customer demand, (ix) approximately $0.9 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, and (x) approximately $0.1 million increase in contract liabilities due to the increase of sales during the period.

Previous wording

Net cash used in operating activities was approximately $1.4 million for the three months ended September 30, 2023 and was primarily attributable to (i) approximately $0.5 million net loss, (ii) approximately $1.0 million increased in contract assets due to engagement with new vendors which required purchase deposits to secure relevant transactions, and (iii) approximately $0.5 million increased in inventories due to change in our business strategy where we rented warehouse in the U.S. to store our inventories. The cash outflow was offset by (iv) non-cash expenses of approximately $45,000, which includes depreciation and accrued interest expenses incurred from our convertible notes, and (v) approximately $0.6 million increased in contract liabilities due to a higher number of sales orders that had not yet been fulfilled but with advance payments made by customers to us to reserve products.

Current wording

Net cash used in operating activities was approximately $3.1 million for the six months ended December 31, 2023 and was primarily attributable to (i) approximately $1.2 million net loss, (ii) approximately $1.7 million increased in contract assets due to engagement with new vendors which required purchase deposits to secure relevant transactions, (iii) approximately $0.2 million increase in accounts receivable due to the increase of credit sales during the period, and (iv) approximately $0.1 million increased in inventories due to change in our business strategy where we rented warehouse in the U.S. to store our inventories. The cash outflow was offset by (v) approximately $0.2 million increased in other payables and accrued liabilities mainly due to accrued professional fees that associated with business expansion.

Previous wording

Net cash used in investing activities was approximately $35,000 for the three months ended September 30, 2024, attributable to the purchase of an automobile for our business uses.

Current wording

Net cash used in investing activities was approximately $68,000 for the six months ended December 31, 2024, attributable to the purchase of some equipment for warehouse and an automobile for our business uses.

Previous wording

Net cash used in investing activities was approximately $4,000 for the three months ended September 30, 2023, attributable to purchase of a computer and furniture.

Current wording

Net cash used in investing activities was approximately $6,000 for the six months ended December 31, 2023, attributable to purchase of a computer and furniture.

Previous wording

Net cash provided by financing activities was approximately $28.3 million for the three months ended September 30, 2024, mainly attributable to approximately $19.7 million proceeds from the reverse recapitalization and $9.0 million proceeds from issuance of convertible promissory notes, offset by the repayment of short-term loans of approximately $0.3 million and approximately $0.1 million in payments of deferred transaction costs.

Current wording

Net cash provided by financing activities was approximately $7.9 million for the six months ended December 31, 2024, 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.

Previous wording

Net cash used in financing activities was approximately $0.2 million for the three months ended September 30, 2023, primarily attributable to approximately $0.1 million in payments of deferred transaction costs and approximately $0.1 million in the repayment of related party loans.

Current wording

Net cash provided by financing activities was approximately $1.7 million for the six months ended December 31, 2023, primarily attributable to $2.0 million proceeds from issuance of convertible promissory notes, offset by approximately $0.2 million in payments of deferred transaction costs and approximately $0.1 million in the repayment of related party loans.