Foxx Development Holdings Inc.

(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.

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:

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.

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 hasone 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.

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.

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.

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):

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:

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.

Note 5 — Accounts receivable, net

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

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:

Note 6 — Inventories

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

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:

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:

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:

Note 9 — Property and equipment, net

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

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:

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:

Note 12 — Related party balances and transactions

Related party balances

Prepaid expenses to a related party

Amount due from related parties - current

Amount due from related parties consists of the following:

Other payable — related party

Other payable — related parties consists of the following:

Related party transactions

Research and development expenses

Consulting expenses

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:

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.

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:

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.

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 offour 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:

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

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 forone 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:

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:

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.

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.

(c) Geographic areas

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.

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:

Operating lease expenses consist of the following:

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.

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:

Disaggregated information of revenues by business line is as follows:

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:

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:

Note 22 — Segment information

The Company conducts business as asingle 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:

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.