Foxx Development Holdings Inc.

Foxx Development Holdings Inc. is a technology innovation firm specializing in the communications sector, founded in Texas in 2017. The company's business model involves providing comprehensive hardware and software specifications to original design manufacturers, followed by engaging third-party agencies for necessary testing and certifications, including FCC Equipment Authorizations and Global Mobile Suppliers Association certifications. Foxx-branded products are then sold primarily to distributors who market them through U.S. public channels and major carriers like T-Mobile, AT&T, and Verizon. The company also initiated E-Commerce operations in March 2024, including sales through TikTok Shop, and provides an App Service by installing applications from developer partners onto its mobile devices for distribution to end-users. The company has expanded its presence across various U.S. locations, including San Francisco, CA, Dallas, TX, Atlanta, GA, Los Angeles, CA, Miami, FL, and New York, NY, to support sales, retail, distribution, and after-sales services, while also driving innovation through research and development efforts.

The company's core business model is centered on a build-to-order approach, where sales begin with bulk purchase orders from third-party distributors. Foxx then customizes products to meet customer specifications and budgets, working with suppliers to manufacture these tailored products. This model helps manage inventory costs and mitigate risks associated with demand fluctuations. The company aims to diversify its revenue and profit streams by increasing its mix of higher-margin products and recurring revenue streams. A significant operational development was the consummation of a business combination on September 26, 2024, where Acri Capital Acquisition Corporation merged into Foxx Development Holdings Inc., and Foxx Development Inc. (Old Foxx) merged into a subsidiary, resulting in Foxx Development Holdings Inc. becoming a publicly traded company listed on Nasdaq under symbols "FOXX" and "FOXXW" ¹.

Foxx's product and service lines primarily consist of tablets, smartphones, wearables, and App services. For the fiscal year ended June 30, 2025, the company sold approximately 8,000 tablets and 328,000 smartphones, generating approximately $60.4 million in revenue ². In the prior fiscal year, ended June 30, 2024, sales were approximately 12,000 tablets and 80,000 smartphones, generating approximately $3.2 million in revenue ³. The company launched its C10 LTE tablet in 2024, featuring a 10.1-inch HD display, MT8766 2.0GHz processor, 4GB RAM, 64GB storage, 8MP + 8MP camera setup, and 802.11 b/g/n/ac Wi-Fi support. The MIRO smartphone product line, launched in 2019, offers a 5.45-inch HD display, a 2450mAh battery providing up to 10 hours of talk time, 8MP rear and 5MP front cameras, Google Voice Assistant, 2GB RAM, and 16GB internal memory expandable up to 32GB via microSD.

New product categories include wearables and smart home solutions. In February 2024, the company partnered with an OEM to develop a 4G LTE kids smartwatch for major U.S. Mobile Network Operator (MNO) and MVNO carriers, with first-generation wearable devices launched in the first calendar quarter of 2025 through E-Commerce channels. A second-generation kids smartwatch with LTE and Bluetooth is expected to launch in the fourth calendar quarter of 2025. In July 2025, Foxx launched "Leak Shield," a smart water leak detector, as its first smart home product, developed in partnership with APEC Water Systems. The company is also developing a solar-powered 4G LTE outdoor security camera and 4G LTE dashcam, jump starter, and tracker for the IoT in Automotive market, all expected to launch in the fourth calendar quarter of 2025. Additionally, Foxx is building a portfolio of IoT modules, including 4G LTE Cat 1 bis, Cat 4, Cat M, NB-IoT, Bluetooth, and Wi-Fi modules, which launched in the first calendar quarter of 2025, with 5G, 5G Redcap, and 5G AI modules potentially launching in the first half of 2026.

For the fiscal year ended June 30, 2025, total revenues, net, were approximately $65,919,166 ⁴, a significant increase from $3,228,559 ⁵ for the year ended June 30, 2024. Cost of goods sold increased to approximately $61,144,561 ⁶ from $3,112,616 ⁷ in the prior year. Gross profit for the year ended June 30, 2025, was approximately $4,774,605 ⁸, up from $115,943 ⁹ in the previous year, resulting in a gross profit percentage of 7.2% ¹⁰ compared to 3.6% ¹¹. The company reported a net loss of approximately $9,020,136 ¹² for the year ended June 30, 2025, an increase from a net loss of $3,430,642 ¹³ in the prior year. Basic and diluted loss per share for the year ended June 30, 2025, was $(1.47) ¹⁴, compared to $(1.04) ¹⁵ for the year ended June 30, 2024. As of June 30, 2025, cash and cash equivalents were approximately $1,875,453 ¹⁶, and the company had an accumulated deficit of approximately $20,047,064 ¹⁷. Total liabilities were $31,364,497 ¹⁸ as of June 30, 2025.

Year-over-year, total revenue increased by approximately $62.7 million, or 1,941.8% ¹⁹, primarily driven by sales from three new major wholesale customers who collectively accounted for 76% of sales, and the launch of new wearable electronic products and services. Revenue from tablet products decreased by approximately $0.2 million, or 22.8% ²⁰, to $509,843 ²¹. Mobile phone product revenue surged by approximately $57.1 million, or 2,224.9% ²², to $59,696,955 ²³, largely due to new phone models and sales to two new major wholesale customers accounting for 50% of aggregate sales. Wearable products and other revenues, a new category, contributed approximately $3.4 million ²⁴. App service commission revenue, also new, generated approximately $2.2 million ²⁵, and other services contributed approximately $0.1 million ²⁶. The overall gross profit percentage increased by 3.7% ²⁷, driven by mobile phone products, wearables, and App service commission revenue. Mobile phone gross profit percentage increased from (1.5)% ²⁸ to 3.5% ²⁹, while tablet gross profit percentage decreased from 23.5% ³⁰ to 14.1% ³¹. App service commission revenue had a 100.0% ³² gross profit percentage due to its commission-based nature without direct costs.

Significant operational developments during the period include the business combination on September 26, 2024, which resulted in the company becoming publicly traded. The company also adjusted its business strategy in 2023 to diversify suppliers and customers, adding new product models and reaching out to eighteen wholesale customers. E-Commerce operations began in March 2024, expanding to platforms like BestBuy.com, Walmart.com, Amazon, Shein, Newegg, and Mercado Libre in 2025. The company launched its first generation IoT cloud platform in the third calendar quarter of 2024, leveraging AWS services, and a second generation in the fourth calendar quarter of 2024, designed for broader compatibility and scalability. The Affordable Connectivity Program (ACP) stopped accepting new enrollments on February 7, 2024, and funding for enrolled customers ceased on April 30, 2024, which temporarily impacted demand for the company's products.

The company expects to enter the U.S. IoT markets and potentially the private label Mobile Virtual Network Operator (MVNO) market, aiming to become a key player both domestically and globally. This expansion involves adding features and services to Foxx-branded devices to enable IoT and MVNO capabilities. The company anticipates a continued rise in General and Administrative expenses as it executes its business expansion plan and integrates IoT-enabled devices with its cloud platform to streamline operations in 2026.

A major growth area is the expansion into new product categories and services. The company launched its first generation wearable devices in the first calendar quarter of 2025 through E-Commerce channels, following a partnership in February 2024 to develop a 4G LTE kids smartwatch for major U.S. Mobile Network Operator (MNO) and MVNO carriers. The second generation of smartwatches for kids, incorporating LTE and Bluetooth technologies, is expected to launch in the fourth calendar quarter of 2025. In the smart home market, the company launched "Leak Shield," a smart water leak detector, in July 2025, developed through a strategic technology partnership with APEC Water Systems. Further smart home products include a solar-powered 4G LTE outdoor security camera, planned for launch in the fourth calendar quarter of 2025, and software applications integrating with wearable products in the "Home Care" category.

Another significant growth vector is the IoT in Automotive market segment. The company is developing a 4G LTE dashcam, expected to launch in the fourth calendar quarter of 2025, which will offer real-time data transfer and remote access. Additionally, a 4G LTE jump starter and a 4G LTE tracker for commercial use are under development, both anticipated to launch in the fourth calendar quarter of 2025. The company is also building a portfolio of IoT modules, with LTE Cat 1 bis, Cat 4, Cat M/NB-IoT, and Bluetooth modules launched in the first calendar quarter of 2025. Development of 5G, 5G Redcap, and 5G AI modules has commenced, with a potential launch in the first half of 2026. The company's IoT cloud platform, with its second generation launched in the fourth calendar quarter of 2024, is designed for scalability to connect tens of millions of devices and offers full IoT PaaS and SaaS capabilities, supporting various IoT verticals.

Operationally, the company plans to continue investing significant resources in outsourcing partnerships and internal research and development to maintain competitiveness and introduce cutting-edge technologies. Current R&D focus areas include comprehensive communication, storage, and energy solutions, as well as advancing 5G technology, including baseband development, RF layout optimization, Session Initiation Protocol (SIP) integration, and rigorous system testing. The company also plans to establish its centralized cloud server in Irvine, CA, for secured data storage and management, prioritizing data security and reliability. The company is actively expanding its presence in the digital marketplace, expecting to increase sales through various leading E-Commerce channels such as TikTok Shop, BestBuy.com, Walmart.com, Amazon, Shein, Newegg, and Mercado Libre.

Regarding capital allocation, the company's liquidity needs are focused on working capital, operating expenses, and capital expenditure obligations. Debt financing, including convertible promissory notes, and cash generated from operations have been used to finance working capital. The company had cash and cash equivalents of approximately $1.9 million ¹⁶ as of June 30, 2025. Research and development expenses amounted to approximately $2.2 million ³³ for the year ended June 30, 2025. The company does not anticipate declaring or paying any cash dividends in the foreseeable future, intending to retain all available funds and future earnings to fund business development and expansion. A total of 1,454,019 shares ³⁴ of common stock were authorized for issuance under the 2024 Equity Incentive Plan.

The company explicitly flagged structural headwinds related to the Affordable Connectivity Program (ACP), which stopped new enrollments on February 7, 2024, and ceased funding for enrolled customers on April 30, 2024. This change temporarily impacted demand for products across all channels and led competitors to lower sale prices, affecting product demand. However, the company continues to target end-users eligible for the Lifeline Program and is diversifying product offerings to mitigate this impact. The company also faces risks from potential changes in trade policies, including new tariffs or changes to existing ones, as highlighted by the April 2, 2025, Executive Order, which introduces uncertainty regarding future costs, revenues, collectability of accounts receivable, carrying value of inventories, and overall financial performance.

The company faces material operational risks, including a significant working capital deficiency, incurred significant losses, and the need to raise additional funds to meet its obligations and sustain operations, which raises substantial doubt about its ability to continue as a going concern within one year ³⁵. There is no assurance that required financings will be available on acceptable terms or at all. The company is highly dependent on its key management team members, and the loss of any member could significantly impact the quality of services and products offered, potentially prompting customers to seek alternative vendors. Customer concentration is a notable risk, with three customers accounting for 27%, 25%, and 25% ³⁶ of total revenues for the year ended June 30, 2025. Supplier concentration is also a risk, with one supplier accounting for 93% ³⁷ of total purchases for the year ended June 30, 2025. Geopolitical and regulatory risks include potential changes in trade policies, such as new tariffs or changes to existing ones, as evidenced by the April 2, 2025 Executive Order, which introduces uncertainty regarding future costs, revenues, and financial performance. The company also identified material weaknesses in internal control over financial reporting, including a lack of sufficient segregation of duties due to limited resources, inadequate design of controls and documentation for significant transaction classes, inability to prepare complete and accurate financial statements in a timely manner, inappropriate implementation of controls over related party transactions, and a lack of appropriate design of controls over the completeness and accuracy of App services revenue.

Management's message to shareholders emphasizes a commitment to technology innovation and market expansion within the communications sector, with a strategic shift towards diversifying product offerings and customer bases to mitigate reliance on limited suppliers and customers. They highlight the recent business combination and public listing as a significant milestone. Key strategic priorities include expanding into the U.S. IoT and MVNO markets, continuously investing in research and development for new products and technologies such as 5G modules, and growing E-Commerce sales channels. Management also acknowledges the challenges posed by the cessation of the Affordable Connectivity Program (ACP) and the need to secure additional financing to address liquidity concerns and continue as a going concern. They are actively working to remediate identified material weaknesses in internal control over financial reporting by hiring qualified accounting personnel, implementing training programs, and establishing an internal audit function.