Foxx Development Holdings Inc.: Form 10-K for the period ended Jun 30, 2026

Overview

Founded in Texas in 2017, we are a technology innovation firm specializing in the communications sector. Since our establishment in 2017, we have expanded our presence to include various locations throughout the United States, such as San Francisco, CA, Irvine, CA, San Diego, CA, Dallas, TX, Atlanta, GA, Miami, FL, Seattle, WA, and New York, NY, as well as an R&D center in Singapore. This expansion enables us to provide sales, retail, distribution, and after-sales support services while simultaneously driving innovation through active research and development efforts aimed at pioneering new customization standards and services.

Our business model involves providing comprehensive hardware and software specifications to original design manufacturers. Once the products are developed, we engage with third-party agencies to secure necessary testing and certifications, including Equipment Authorizations from the FCC and certifications from the Global Mobile Suppliers Association. We currently offer a range of Foxx-branded products, including tablets, smartphones, wearables, and expect to launch other high-quality communication terminals. Our products are generally priced competitively after considering various factors such as product costs, research and development investments, regulatory compliance, testing expenses, and shipping costs. Our customers are primarily distributors who sell Foxx-branded products in the U.S. public channels and to major carriers in the United States such as T-Mobile, AT&T, and Verizon. We also began E-Commerce operations in March 2024 and our E-Commerce customers include customers from our Amazon and TikTok Shops. We also provide an App Service by installing applications from App developer partners onto its mobile devices and facilitating the distribution of these devices to end users.

The Business Combination

Foxx Development Holdings Inc. was incorporated under the name “Acri Capital Merger Sub I Inc.” as a Delaware corporation on November 13, 2023. On September 26, 2024 (the “Closing”), Acri Capital Acquisition Corporation, a Delaware corporation (“ACAC”) consummated a business combination pursuant to the terms of the business combination agreement (as amended from time to time, the “Business Combination Agreement”), by and among ACAC, Acri Capital Merger Sub I Inc., a Delaware corporation and wholly-owned subsidiary of ACAC (the “Purchaser”), Acri Capital Merger Sub II Inc., a Delaware corporation and wholly-owned subsidiary of Purchaser (“Merger Sub”), and Foxx Development Inc., a Texas corporation (“Foxx”), pursuant to which (i) ACAC merged with and into Purchaser (the “Reincorporation Merger”), and (ii) Foxx merged with and into Merger Sub, with Merger Sub surviving as a wholly-owned subsidiary of Purchaser (the “Acquisition Merger”). The Reincorporation Merger, the Acquisition Merger, and the transactions contemplated under the Business Combination Agreement, are collectively referred to as the “Business Combination”. Upon Closing, the Purchaser was renamed as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.” (the “Operating Subsidiary”).

The ACAC securities previously traded on the Nasdaq Capital Market (“Nasdaq”) were delisted and ceased trading following the Closing. On September 27, 2024, one business day after the Closing, our Common Stock and Warrants became listed on the Nasdaq under trading symbols “FOXX” and “FOXXW,” respectively.

Current Products

Our current revenue stream is primarily derived from the sales of tablets and smartphones. For the fiscal year ended June 30, 2026, our sales reached approximately 15,174 tablets, approximately 1,633,807 smartphones, approximately 36,310 wearables, and approximately 18,206 other IoT products sold, generating a revenue of approximately $52.6 million. For the fiscal year ended June 30, 2025, we achieved sales of approximately 8,544 tablets and 2,126,383 smartphones sold, generating approximately $60.4 million in revenue.

Tablet Products

We produce affordable tablets to meet the diverse needs of consumers across various demographics, aligning with our goal of democratizing technology and enhancing digital inclusion for all. These tablets facilitate broader access to technology, enabling individuals from diverse economic backgrounds to enjoy the benefits of digital devices while also serving as invaluable educational aids.

In 2025, we launched C10 Pro tablet, which is equipped with the following key features:

• 10.1-Inch HD Display: Offers vibrant visuals and ample screen real estate for immersive viewing of movies, and videos.
• MT6765 2.2GHz Processor: Delivers smooth performance, allowing users to seamlessly navigate through apps, games, and multitasking activities.
• 4GB of RAM and 64GB of storage and 8MP + 8MP Camera Setup: Allows users to capture and store multimedia content without worrying about running out of space.
• Mobile Network Enabled: Phone + Tablet in One: Supports SIM card use and mobile network, allowing users make calls, send texts, and use data like a phone, while enjoying the 2-in-1 convenience of a tablet.

Thus far, we have successfully introduced several generations of products to the market, each tailored to meet specific consumer needs and preferences. This strategic approach not only allows us to diversify our product range but also enables us to remain agile and responsive to the evolving trends and demands of the marketplace. By continually innovating and expanding our offerings, we aim to ensure that we remain at the forefront of meeting the diverse needs of our consumers.

Mobile Phone Products

We are committed to developing high performance smartphones at competitive prices to provide accessibility for all. Our focus on innovation, efficient manufacturing, and strategic partnerships allows us to deliver premium technology without compromising affordability.

In 2019, we launched our MIRO product line to cater to users seeking an affordable smartphone with quality performance, which became available at Metro® by T-Mobile stores beginning May 20, 2019. Since our launch of the MIRO phones, we have introduced multiple product generations to the market to offer a range of options that can meet evolving consumer needs. With each new generation, we aim to raise the bar in delivering quality performance at an accessible price point, empowering users to stay connected, productive, and engaged. Our MIRO phone launched in the second quarter of 2025, C69M Pro, is equipped with the following key features:

• Immersive 6.9” 120Hz Display: Enjoy a vivid viewing experience with our immersive 6.9” HD+ screen, great for multimedia consumption and responsive gaming.
• Large Lasting Battery: Stay connected longer with a high-capacity 5060mAh battery.
• High-Quality Cameras: Capture life’s moments in stunning detail and produce vibrant photos even in low light with the 50MP main rear camera and take brilliant selfies with the 16MP front camera.
• Superior 8-Core Performance: Powered by the MTK Helio G81 Octa-Core processor (up to 2.0GHz), C69M Pro delivers reliable speed for multitasking.
• Quality Performance: Experience seamless app performance and multitasking capabilities with 8GB of RAM. Store photos and music effortlessly with 256GB of built-in memory.

Our newest-generation MIRO phone, S69 Pro, was launched in March 2026 with the following specifications:

In Q2 2025, we launched our FOXX-branded product line, which is designed for consumers seeking smartphones with higher-end performance specifications at mid-range price points.

Wearables

To complement our smartphones, tablets, and the IoT cloud platform, we are developing customization standards for a diverse range of wearable devices, including Bluetooth watches, Bluetooth bracelets, GPS watches, 4G watches, and etc. We are also researching for connecting wearable products with sports equipment and will work with chip manufacturers, solution providers, and device manufacturers to develop high-quality components and equipment, enabling us to offer reliable and innovative solutions to the end-users.

In February 2024, we partnered with a branded device Original Equipment Manufacturer (“OEM”) and started developing a 4G LTE kids smartwatch for major US Mobile Network Operator (“MNO”) and MVNO carriers. Our first-generation wearable devices, MIRO-W1,were launched in the first calendar quarter of 2025 through our E-Commerce channels. Our second-generation smartwatches for kids, MIRO-W4, were launched in July 2026.

We also launched other wearable devices such as AI smart glasses in Q3 2025. iVision6, our first-generation AI smart glasses allow users to conduct seamless cross-language conversation, enabled by Microsoft’s trusted translation technology. With an 8MP Sony lens, users enjoy shooting 3200W-pixel photos and smooth 1080P/30fps videos. With 32GB built-in storage, users can save thousands of photos, videos, or translated recordings without running out of space. Users can also access ChatGPT directly through iVision6 for natural, on-the-go AI interactions with voice-activated convenience. We launched the second-generation AI smart glasses, iVision6 Pro, in May 2026.

Smart Home Solutions

We expanded our business into smart home market segments. In July 2025, we successfully launched our first product “Leak Shield”, a smart water leak detector we developed through our strategic technology partnership with APEC Water Systems (“APEC”), a premier U.S. manufacturer of water filtration systems. We worked closely with APEC throughout the product development process, bringing expertise in IoT connectivity, mobile app development, and sensor integration to create the APEC Smart Water Leak Detector (SKU: SMTD-001-1PK).

In the second half of 2025, we developed MIRO VI03 4G LTE Dual Dash Cam and launched this product in August 2026. With dual recording capabilities— 4K UHD front camera and 1080P in-cabin—this dash camera clearly captures every crucial moment inside and outside the vehicle. Combined with WDR and a large F1.8 aperture, the image quality remains sharp even in low-light conditions. A built-in 4G LTE module allows users to remotely view and play back videos and locate their vehicle anytime, anywhere via a mobile app. Equipped with electronic fences, collision and motion detection, it provides instant push notifications for abnormal situations.

Target End-Users

Our current product lines are tailored to cater to the following types of end-users:

Budget Conscious/Practical Shopper: These individuals are meticulous researchers who make informed decisions. They seek practical tablets and smartphones to seamlessly navigate their daily digital activities, including browsing, attending online lectures, messaging, social media interactions, calls, web browsing, GPS navigation, and photography. They look for IoT products that solve a specific everyday problem at a justifiable price, favoring durability, easy setup, and cross-device compatibility over premium branding or feature depth they will not use.

First-Time Tablets or Smartphone Users: Embodying the essence of social connectivity, these users are driven by a fear of missing out among peers. They are highly active online, engaging primarily in messaging, photo-sharing, gaming, and staying updated within their social circles. Despite limited purchasing power, they aspire for visually appealing tablets phones with unique features, typically acquired through initial jobs or parental support.

Parents of First-Time Tablets or Smartphone Users: These individuals seek capable yet budget-friendly tablets and smartphones for their children, understanding the importance of providing essential educational or daily functionalities without straining their finances. With considerable purchasing power in some instances, they often begin their search online, prioritizing terms such as “best value” or “affordable”. Influenced significantly by pricing and reviews, they prioritize obtaining the best value proposition for their children’s needs.

Strategic Approach to Sales and Distribution

Third Party Customer-Driven Sales Model

Since inception, we have been employing the strategy of engaging with distributors who purchase products from us and then market our products to consumers through the networks of prominent telecommunications carriers across the United States. We have been able to achieve substantial sales by working with customers who have existing relationships with prominent telecommunications carriers and can efficiently sell our products, allowing us to build presence in the market. We also entered into multiple master agreements with Mobile Virtual Network Operators (MVNOs), broadening our reach and delivering sophisticated telecommunications solutions to an extensive consumer base.

Diversified Sales Approach

In prior years, we actively sought qualification for and participated in national initiatives aimed at enhancing the affordability and accessibility of communication services for individuals with limited income. As a certified supplier for the FCC’s Lifeline and Affordable Connectivity Program (ACP), we played a vital role in efforts to ensure essential communication services are economically accessible. Even though we continue to serve as a key supplier for the Lifeline Program, we have diversified our product offerings to target customers who are interested in other mobile devices, tablets, and IoT products. In addition, we launched our products through TikTok Shop in March 2024 and various online E-Commerce platforms such as BestBuy.com, Walmart.com, Amazon, Shein, Newegg and Mercado Libre in 2025. We have been actively expanding our presence in the digital marketplace and expect to increase our sales through a variety of leading E-Commerce channels. We believe this approach not only broadens our reach but also caters to the preferences of digital consumers, offering them convenient access to our telecommunications solutions. By integrating into various sales channels, both indirect and digital, we are committed to providing high-quality products to a wide audience, driving our growth, and enhancing our position in the competitive electronics market.

Internal Support

In order to maximize product accessibility across the United States, we have a team of dedicated internal sales staff and key sales agents who manage a network of hundreds of customers spread across seven major regions. In addition to managing direct partnerships with these customers, our internal sales team also collaborates with prominent telecommunications carriers, enabling our products to be available for sale online and in the physical retail stores of these carriers.

Competitive Advantages

We stand out in the competitive communications market by leveraging its foundational advantages and core operational strategies, which encompass a range of competitive strengths crucial for maintaining and enhancing Foxx’s market position:

Geographical Location and Market Presence

We have established a comprehensive network anchored by our key operational facilities across various strategic locations. We are headquartered in Irvine, CA, where we have established a center that integrates sales, retail and distribution, and after-sale support services, and research and development of customization capabilities. The Irvine office serves as the epicenter for our research and development and sales and marketing activities, highlighting our commitment to innovation and market expansion. The San Diego, CA, and Atlanta, GA offices play instrumental roles in executing our sales and marketing initiatives and providing essential operational support. In addition, beginning in September 2026, our Singapore office serves as the epicenter for both our supply chain management and our research and development efforts in Southeast Asia. This strategic distribution of roles and responsibilities across our office locations allows operational efficiency and market responsiveness.

We also maintain a strong sales presence in major metropolitan areas such as Los Angeles, CA, Dallas, TX, and New York, NY. These strategic locations are carefully selected to maximize our market penetration and facilitate direct engagement with our diverse customer base. Through this geographically diverse presence, we offer comprehensive after-sales services and tailored solutions, thereby reinforcing our commitment to customer satisfaction and technological leadership in the electronics industry.

Experienced Management Team

Our leadership team has decades of combined experience across various aspects of the communications sector, with more than 20 years of experience in major domestic and overseas electronics companies, having held leadership and management roles. Mr. Greg Foley, our Chief Executive Officer, has more than 25 years of experience in leading the sales and marketing of electronic products. Mr. Haitao Cui, our Director and Executive Vice President, also has a background in electrical and engineering automation and over 25 years of experience in sales and marketing of electronics. Our experienced team comprehensively understands market dynamics, consumer demands, and technological trends. We rely on their insights and strategic decision-making to effectively navigate the complex market and to adapt and grow amidst constantly changing industry conditions.

Build-to-Order Business Model

We manage our inventory and meet market demand through our build-to-order business model. Our sales begin with receiving bulk purchase orders with general product designs, specifications, and budgets from our customers, who are third-party distributors specializing in selling mobile phones and tablets to end-users through sales channels. We then provide our customers advice on adjustments and customize the products to secure the desired performance within their budget. Once the product specification is determined, we work with suppliers to build customized products that meet such our customers’ expectations. Over time, by listening to the demands and specifications of our customers, we have been able to deliver high-quality, high-performance products that our customer trust and value. Our business model allows us to effectively manage inventory costs and mitigate risks associated with changes in customer demand. We secure steady revenue from bulk purchase orders placed by the customers.

The orders we receive from customers provide us with a great opportunity to understand market trends and customer demand. Direct relationships with our customers give us an advantage in observing the changes in market demands. As a result, we can develop new models based on our understanding of the market. After establishing a market presence through our customers, we can further diversify our revenue and profit streams. We take our own Foxx-branded products as an initiative to innovate. Our growth strategy involves reaching more end-users through maintaining the relationship with current customers and cultivating relationship with new customers. We aim to optimize the balance of liquidity, profitability, and growth with a focus on increasing the mix of our product portfolio to higher-margin products and recurring revenue streams.

Research and Development/Innovation Capability

We have strong competitive advantages in our product design and innovation capabilities. Moreover, we have resources that allow us to outsource customized research and development capabilities as needed, thereby gaining additional insights into the market and developing more robust product design and customization standards. Our innovative product planning keeps us at the forefront of technological trends, ensuring that the company remains as the forerunner in introducing novel and high-performance products to the market.

Supply Chain Management

We have efficiently managed our supply chain through diversification of sources, strategic partnerships, optimized logistics, and efficient inventory management, all of which have contributed to our current success. We have cultivated strong relationships with multiple suppliers in Indonesia and Southeast Asian countries. This capability enables the company to maintain a balance between supply and demand, reduce operational costs, and promptly respond to market changes, thereby enhancing competitiveness and customer satisfaction.

Quality Control

Quality is the cornerstone of our value proposition. We implement strict quality control measures at every stage of the manufacturing process in our original equipment manufacturer factories, from material procurement to manufacturing processes and final product testing. Our commitment to quality ensures that all our products meet the highest reliability and performance standards, fostering trust and loyalty among customers and setting us apart from our competitors.

These competitive advantages contribute to our success and resilience in the market. The combination of experienced leadership, innovation, efficient supply chain management, and stringent quality control positions us as a leader in the communication section. This enables us to deliver exceptional value to customers and stakeholders alike.

Growth Strategies with IoT Cloud Platform

Our IoT Cloud Platform

We have developed a cloud platform that connects all our devices to a secure central server, creating a unified ecosystem. The platform brings significant benefits, particularly in systematized upgrades, more efficient IoT operations, improved human-machine interactions, enhanced data analytics, and smarter decision-making.

The cloud platform is able to streamline the upgrade process for our devices. Centralized cloud server management allows for efficient updates, patches, and new features across our product line, ensuring devices remain up to date with the latest advancements and security measures, significantly enhancing performance and customer satisfaction.

We prioritize data security and reliability in designing and developing the platform because we understand that the reliability of our cloud infrastructure is the foundation for continuous service, trust, and confidence among customers. To achieve this, we plan to establish our centralized server in Irvine, CA for secured data storage and management.

The platform facilitates comprehensive data analytics and insights, allowing users to gain valuable insights into their personal information and habits from connected device data. These insights enable informed decisions, efficient operations, personalized experiences, and customized solutions based on individual behavior and preferences.

Our cloud platform is designed to offer the following functionalities:

• Firmware-over-the-air (FOTA) software upgrade.
• Launch new software releases.
• Device and sensors management.
• SIM cards activation, provisioning and management.
• Data usage monitoring, reporting and billing management.
• Using Application Programming Interfaces (API) & Software Development Kit (SDK) to integrate many device types and IoT protocols.
• Enable both “upward” integration with existing cloud service providers (e.g. Amazon Web Services (AWS)) and “downward” integration with 3rd party application for various IoT verticals (e.g., smart home, healthcare, smart building, etc.).
• IoT data management & analytics using artificial intelligence (AI) or machine learning (ML) algorithms.
• Storing data from production processes locally to prevent security breaches.
• Data security, firewall, cyberattack alert and prevention, data backup.
• Provide IoT standard — MATTER certification (in plan).
• 24x7 technical support.

This open platform allows compatibility and interoperability with a wide range of device types, IoT protocols, and ecosystems. It not only serves as a device management platform for Foxx’s own communication terminals (such as smartphones, tablets, and IoT sensors) but also offers software development kits and application programming interfaces to other device manufacturers and third-party application developers. This design allows third-party devices and apps to integrate with our cloud platform seamlessly. Additionally, our infrastructure is designed to interact with multiple cloud providers, including Amazon Web Services, Google Cloud Platform, and Microsoft Azure. We believe that our unique model, which combines IoT modules, devices, data, the cloud platform, and services, positions us to deliver comprehensive end-to-end IoT solutions to our customers.

We launched the first generation of our IoT cloud platform in the third calendar quarter of 2024. We allocated time and resources since the first calendar quarter of 2024 to finalize the design and setup of the cloud platform that integrates with the AWS system. The first generation of our IoT cloud platform leverages AWS cloud services and AWS IoT Core services in addition to the customized development by us to provide device management, user management, data management and security management functions.

We developed a second generation of our IoT cloud platform, driven by the vision of a much more inclusive and smarter IoT platform that is compatible with all our devices and potentially products from other brands. This platform integrates more advanced technologies researched and developed by Foxx, with the potential scalability to connect tens of millions of devices. This platform was launched to the market in the fourth calendar quarter of 2024. Our second generation IoT cloud platform involves a full IoT PaaS with the fundamental capabilities of device management, control and status management, user management, access and permission, and physical model management. It supports comprehensive and modern IoT communication protocols. In addition, the second generation IoT platform has full IoT SaaS capabilities with openness and flexibilities of integrating with different IoT verticals, which enables developing customized and compatible services on multiple protocols module, vertical module, Edge module, mobile devices module, and online customized module. It will also provide front-end apps (Android/iOS mobile apps) to the end-users to manage and monitor their IoT devices, and offer multi-tenants services including data, notification, alert, subscription, visualization, and devices interoperable services.

Warranties and Customer Services

We provide a one-year warranty on its products, offering after-sales service support to dealers in two ways. Dealers can opt for direct product replacement by us, or they can choose to receive 2% after-sales service spares from Foxx. In the latter case, our customers handle after-sales service to end-users independently after exhausting the supplied spares, without further support from us.

Competition

We believe the principal competitive factors impacting the market for our products are features and functionality, performance, quality and brand. To maintain and improve our competitive position, we must continue to expand our user base, invest in research and development, grow our distribution network, and leverage our strategic relationships.

Our products compete with a variety of solutions providers in different market segments. Our current competitors include:

• Smartphones and Tablets — Motorola, Inseego, HMD, TCL, Vortex, Tinno, BLU, Sky, Maxwest, and Hot Pepper.
• IoT Products — Netgear, Franklin Wireless, TCL and ZTE.

As the market for our solutions and services expands, other entrants may seek to compete with us either directly or indirectly.

Intellectual Property

Trademarks

Domain Names

Patents

We do not currently have any registered patents. However, our research and development team is actively assessing our customizations, specifications, and other technical expertise and know-how currently protected as trade secrets. We plan to file patents to safeguard our technical expertise and innovations.

Research and Development

For the year ended June 30, 2026, our research and development expenses amounted to approximately $2.9 million, a significant portion directed towards the development of new products.

Our strategic allocation of spending in product research and development reflects our commitment to innovation and technological advancement in emerging sectors. To achieve our goals in IoT product development, we have engaged, and may continue to engage, in outsourcing collaborations with industry-leading partners, leveraging their expertise and resources to accelerate our progress and ensure the delivery of cutting-edge solutions.

Employees

As of the date of this report, we had 23 full-time employees. We believe that we maintain a good working relationship with our employees, and we have not experienced any material labor disputes.

Certifications

For open market products including U.S. E-Commerce sites, retail stores and distributor channels, etc., we have conducted FCC and Google Mobile Services test and obtained corresponding certifications.

FCC certification is to ensure that an eligible electronics device only produces safe levels of radio frequency (RF). For more information, see “Government Regulation — FCC Equipment Authorization” below.

GMS refers to a selected array of Google proprietary applications and services that embody the company’s core values (such as Chrome, Gmail, YouTube, Maps, PlayStore, etc.). Android devices need the GMS certification to run all the Google proprietary applications, without which, the device will not be able to operate any of these applications.

Government Regulation

FCC Equipment Authorization

In the United States, the FCC regulates RF devices. RF devices, including components used in cell phones, routers, and other devices we sell, are devices capable of emitting radio frequencies by radiation, conduction, or other means. An RF device being imported, marketed, or used in the United States is subject to the equipment authorization requirements established by the FCC and cannot be imported, marketed, or used without complying with such requirements. Equipment authorization requirements are intended to ensure that RF devices comply with the FCC’s emissions, power level, and other technical rules.

FCC RF Exposure and Specific Absorption Rate (SAR)

Handheld and body-worn mobile devices (e.g., smartphones and tablets) must satisfy FCC human exposure limits for RF radiation, quantified via Specific Absorption Rate ("SAR") testing under 47 C.F.R. §§ 2.1091 and 2.1093.

FCC Covered List

Pursuant to the Secure and Trusted Communications Networks Act of 2019, the FCC created and maintains a list (Covered List) of telecommunications services and equipment that pose an unacceptable risk to the national security of the United States. The FCC periodically updates the Covered List, and companies that appear on the Covered List are subject to change based on the security determinations of the FCC and other U.S. Federal agencies with which the FCC works. Categories of equipment made by companies, including equipment manufactured by their subsidiaries or affiliates, on the Covered List cannot be authorized in the United States.

FCC Labeling and Technical Disclosures

The FCC mandates indelible physical or approved electronic labeling ("e-labeling") reflecting our registered FCC Identification Numbers ("FCC IDs"), alongside mandatory Part 15 advisory disclosures within product packaging and user manuals.

Executive Order 13873 & Department of Commerce ICTS Rules

Executive Order 13873 ("Securing the Information and Communications Technology and Services Supply Chain") and implementing regulations promulgated by the U.S. Department of Commerce (15 C.F.R. Part 791) empower the Secretary of Commerce to review, prohibit, or impose mitigation measures upon any acquisition, importation, transfer, or use of Information and Communications Technology and Services ("ICTS") that involves hardware, software, or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a designated "foreign adversary" (currently including the People’s Republic of China, Russia, Iran, North Korea, Cuba, and the Maduro regime in Venezuela).

To mitigate ICTS scrutiny, avoid regulatory enforcement, and ensure product viability, our connected device cloud architecture requires localization and processing of telemetry, spatial coordinates, and video metadata within secure U.S.-based data centers (e.g., AWS or Microsoft Azure U.S. regions), supplemented by cryptographic controls compliant with Federal Information Processing Standards ("FIPS").

Data Privacy, Cybersecurity, and Spatial/Biometric Information

Our connected devices and companion mobile applications collect, transmit, store, and process user data, geographic telemetry, video recordings, and, where applicable, biometric data points. We are subject to a complex patchwork of state, federal, and international privacy and cybersecurity mandates:

State Comprehensive Privacy Legislation: Under statutes such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, "CCPA/CPRA," Cal. Civ. Code § 1798.100 et seq.), precise geolocation data generated by our dashcams and mobile devices constitutes "Sensitive Personal Information." We are subject to strict obligations regarding notice, collection limitations, consumer opt-in/opt-out mechanisms, and data subject access requests ("DSARs"), including the absolute right of consumers to delete their stored telemetry and video recordings. Analogous comprehensive privacy statutes have been enacted across numerous other states (including Virginia, Colorado, Connecticut, Utah, and Texas).

Biometric Information Privacy: Smart surveillance hardware incorporating automated facial detection, human body tracking, or license plate recognition triggers strict biometric privacy regulations, notably the Illinois Biometric Information Privacy Act ("BIPA," 740 ILCS 14/). BIPA imposes statutory liquidated damages for collecting biometric identifiers without advance written notice, signed user consent, and a publicly available retention and destruction policy.

Federal Trade Commission Act (FTC Act): Under Section 5 of the FTC Act (15 U.S.C. § 45), the Federal Trade Commission investigates and penalizes unfair or deceptive acts or practices, targeting companies that fail to implement reasonable and appropriate cybersecurity safeguards for connected devices or misrepresent data privacy practices in product marketing.

Internet of Things ("IoT") Device Security: State statutes such as California Senate Bill 327 (Cal. Civ. Code § 1798.91.04) mandate that all connected devices sold in the state be equipped with "reasonable security features" appropriate to the nature of the device, prohibiting generic pre-programmed factory passwords and requiring unique device credentials or mandatory password reset mechanisms upon initial setup. We evaluate our embedded security against guidelines issued by the National Institute of Standards and Technology ("NIST"), including NIST IR 8259 (Foundational Cybersecurity Activities for IoT Device Manufacturers).

International Trade, Customs, and Supply Chain Sourcing

A substantial portion of our product components, printed circuit board assemblies ("PCBAs"), and finished products are sourced from overseas contract manufacturers and component vendors:

Tariffs and Import Duties: Our imported electronic assemblies and finished consumer goods are subject to U.S. Customs and Border Protection ("CBP") enforcement, including tariffs imposed under Section 301 of the Trade Act of 1974.

Forced Labor Restrictions: Under the Uyghur Forced Labor Prevention Act ("UFLPA," Public Law 117-78), CBP applies a rebuttable presumption that all goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or produced by entities on the UFLPA Entity List, are prohibited from entry into the United States. We conduct supply chain traceability audits and require Tier-1 suppliers to certify compliance with UFLPA requirements to avoid customs detention, seizures, or supply chain impoundment.

Consumer Product Safety and Commercial Hardware Standards

Our consumer hardware products are governed by federal safety oversight and commercial safety standards:

Consumer Product Safety Commission (CPSC): Under the Consumer Product Safety Act ("CPSA," 15 U.S.C. § 2051 et seq.) and the Consumer Product Safety Improvement Act ("CPSIA"), we are subject to federal product safety regulations, chemical restriction standards (e.g., lead and phthalates in children’s accessible accessories), and mandatory reporting obligations. Section 15(b) of the CPSA mandates that manufacturers, distributors, and retailers immediately inform the CPSC upon learning that a product fails to comply with an applicable consumer product safety rule, contains a defect that could create a substantial product hazard, or creates an unreasonable risk of serious injury or death.

Battery Safety and Transportation: Our portable products incorporate high-energy-density rechargeable lithium-ion cells. We are required to satisfy international transport safety testing criteria, including the UN Manual of Tests and Criteria (UN 38.3), and Department of Transportation ("DOT") Hazardous Materials Regulations for shipping lithium cells.

Commercial Certification Standards: While third-party safety testing under standards such as UL 62368-1 (audio/video, information, and communication technology equipment) and UL 2054 (household and commercial batteries) is voluntary at the federal level, these certifications are practically mandatory for commercial distribution, channel financing, product liability insurance underwriting, and qualification for sales through major retail partners and nationwide wireless carrier networks.

Environmental Matters

Our facilities and operations, in common with those of our industry in general, are not subject to domestic or international laws and regulations designed to environmental protections. We have always been dedicated to environmental protection. With a steadfast commitment to sustainable development, the brand prioritizes environmentally friendly materials in the composition, manufacturing processes, and design of its products. It adopts eco-friendly manufacturing processes, showcasing innovative designs that emphasize a low carbon footprint, green practices, and energy efficiency principles. Each product embodies our comprehensive approach, seamlessly integrating environmental values into material selection, production techniques, and overall design philosophy.

Risk Management

On September 24, 2024, our Board of Directors approved our Cybersecurity Incident Response Policy (the “Cybersecurity Policy”), We have integrated the processes as described in the Cybersecurity Policy into our overall risk management systems and processes According to the Cybersecurity Policy, we routinely assess material risks from cybersecurity threats that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.

Pursuant to the Cybersecurity Policy, we conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.

Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks, reasonably address any identified gaps in existing safeguards, and regularly monitor the effectiveness of our safeguards.

We require third-party service providers to certify their ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of their security measures that may affect the Company. We also established our centralized server in Irvine, CA for secured data storage and management. As we have been adding IoT devices to our product mix, we plan on engaging consultants and other third parties as needed in connection with our risk assessment policies and processes. These service providers assist us to design and implement our cybersecurity policies and procedures, as well as to monitor and test our safeguards.

As part of our overall risk management strategies, we also conduct cybersecurity trainings for personnel at all levels and in all departments.

Governance

One of the key functions of our Board of Directors is informed oversight of our risk management process, including risks from cybersecurity threats. Our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our Board of Directors administers its cybersecurity risk oversight function primarily through the Audit Committee.

Our CFO, Joy Hua, and IT Manager, Jun Lu, constitute our cybersecurity incident management team and are primarily responsible to assess and manage our material risks from cybersecurity threats. As part of the executive team reporting to the Board, our Chief Compliance Officer oversees our cybersecurity policies and processes, including those described in “Risk Management” above. The processes by which our Chief Compliance Officer is informed of and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents include log review from IT and operations teams or reports received from network systems and applications if any unusual activity occurs, such as email system notification of items opened that could be malicious.

Our corporate headquarters are located in 15375 Barranca Parkway C106, Irvine, CA. Our facilities are leased from independent third parties. The lease terms range from 1 to 7 years, with the option to renew upon expiration. We believe our current facilities are generally sufficient for our present needs.

* Shared office

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. Currently, we are not a party to any material legal proceedings or subject to any material claims. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

The following discussion and analysis of our results of operations and financial condition should be read together with our consolidated financial statements and the notes thereto and other financial information, which are included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below and those discussed in other sections of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our financial statements have been prepared in accordance with U.S. GAAP. In addition, our financial statements and the financial information included in this Report reflect our organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.

Overview

Foxx Development Holdings Inc. (“we,” “our”, “us”, or the “Company”) was incorporated on November 13, 2023 under the name “Acri Capital Merger Sub I Inc.” On September 26, 2024 (the “Closing”), Acri Capital Acquisition Corporation, a Delaware corporation and our parent company at the time, (“ACAC”) consummated a previously announced business combination pursuant to the terms of the business combination agreement, dated February 18, 2024 (as amended on May 31, 2024, collectively, the “Business Combination Agreement”), by and among us, ACAC, Acri Capital Merger Sub II Inc., a Delaware corporation and our wholly-owned subsidiary at the time (“Merger Sub”), and Foxx Development Inc., a Texas corporation incorporated on May 17, 2017 (“Old Foxx”), pursuant to which (i) ACAC merged with and into us (the “Reincorporation Merger”), with us surviving the Reincorporation Merger, and (ii) Old Foxx merged with and into Merger Sub, with Merger Sub surviving as our wholly-owned Delaware subsidiary (the “Acquisition Merger”). The Reincorporation Merger, the Acquisition Merger, and the transactions contemplated under the Business Combination Agreement, are collectively referred to as the “Business Combination”.

Upon Closing, we were renamed as “Foxx Development Holdings Inc.”, and the Merger Sub was renamed as “Foxx Development Inc.” (the “Subsidiary”).

The ACAC securities previously traded on the Nasdaq Capital Market (“Nasdaq”) were delisted and ceased trading following the Closing. On September 27, 2024, one business day after the Closing, our Common Stock and Warrants became listed on the Nasdaq under trading symbols “FOXX” and “FOXXW,” respectively.

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

Our business model involves providing comprehensive hardware and software specifications to original design manufacturers. Once the products are developed, we engage with third-party agencies to secure necessary testing and certifications, including Equipment Authorizations from the FCC and certifications from the Global Mobile Suppliers Association. We currently offer a range of Foxx-branded products, including tablets, smartphones, wearables, and expects to launch other high-quality communication terminals. Our products are generally priced competitively after considering various factors such as product costs, research and development investments, regulatory compliance, testing expenses, and shipping costs. Our customers are primarily distributors who sell Foxx-branded products in the U.S. public channels and to major carriers in the United States such as T-Mobile, AT&T, and Verizon. Our customers also included individual e-commerce customers from TikTok Shop, which we began our e-commerce operations in March 2024.

We manage inventory and meet market demand through our build-to-order business model. After customers place purchase orders in bulk with us, we place purchase orders with suppliers to manufacture the products that meet customers’ products specifications and budget requirements. Prior to 2023, we relied on limited suppliers for the manufacturing of mobile phone and tablet products and on limited customers for the distribution of these products. We selectively concentrated our resources on our tablet and mobile phone products because such products held the strongest market potential and revenue generation capability at the time when remote work and online classes became more prevalent.

Beginning in 2023, we adjusted our business strategy to avoid reliance on limited suppliers and customers and to diversify suppliers and customers to mitigate the concentration and reliance risk. We have added new product models across each product line to target a broader range of customers. As of the date hereof, we have reached out to a total of twenty-three wholesale customers to expand our operations in the market and expect to secure purchase orders from these new customers. At the same time, to meet the various product demands of current and prospective customers, we have connected with suppliers who can provide manufacturing support when we secure purchase orders from our customers. In addition, we expanded our product range further and launched Internet of Things (IoT) products such as water leak sensors. Because of our strategic shifts to diversify our product offerings, we expanded our sales channels to target end-users who are interested in mobile devices, tablets, wearables, and IoT products. We began launching our products through TikTok Shop in March 2024 and stepped up our sales efforts through our Amazon store and other online platforms. We expect to keep growing our sales through multiple e-commerce channels.

In January 2026, we began engaging in dropship arrangement to reduce additional freight cost and usage of our warehouse spaces. This change of business strategy helped us to reduce our freight costs and promoted better gross margin with our wholesales business.

Sales for the fiscal year ended June 30, 2026 were $52,584,432, a decrease of $13,334,734, or 20.2%, compared to $65,919,166 for the fiscal year ended June 30, 2025. The decrease was primarily attributable to two factors. First, tariffs imposed on imported goods, together with uncertainty as to their scope and duration, caused significant volatility in our landed costs and selling prices during the period; in response, certain customers deferred or reduced purchase commitments pending greater pricing clarity, which lowered order volumes. Second, a sharp increase in memory chip prices raised our product costs, and we increased selling prices in an effort to preserve gross margin. Our two major customers, which accounted for 77.9% of our total sales, did not accept the higher prices to the extent we anticipated, and the resulting reduction in order volumes further reduced sales. These factors were compounded by broader macroeconomic conditions, including sustained inflation that weakened consumer purchasing power and lengthened the mobile phone replacement cycle, which we believe has extended from approximately one to two years to more than two years.

Accounting Treatment

While the legal acquirer in the Business Combination was ACAC, for financial accounting and reporting purposes under U.S. GAAP, Old Foxx was the accounting acquirer, and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the issuance of stock by ACAC for the stock of Old Foxx) does not result in a new basis of accounting, and the consolidated financial statements of the combined company represent the continuation of the consolidated financial statements of Old Foxx in many respects. Accordingly, the assets, liabilities and results of operations of Old Foxx became the historical financial statements of the combined company, and ACAC’s assets, liabilities, and results of operations were consolidated with Old Foxx beginning from the Closing on September 26, 2024. Operations prior to the Business Combination are presented as those of Old Foxx. The net assets of ACAC are recognized at historical cost (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded upon execution of the Business Combination.

Nasdaq Listing Update

On July 22, 2026, we received a deficiency letter from the Nasdaq Listing Qualifications Department of the Nasdaq notifying us that, for a period of 30 consecutive business days, our MVLS closed below the $35,000,000 MVLS threshold required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have until January 19, 2027 to regain compliance with the MVLS Requirement (the “MVLS Compliance Period”). To regain compliance, our MVLS must close at $35 million or more for a minimum of ten consecutive business days during the MVLS Compliance Period. If we do not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel. We intend to actively monitor the market value of our listed securities and may, if appropriate, consider implementing available options to regain compliance with the MVLS Requirement. There can be no assurance that we will be able to regain compliance with Nasdaq Listing Rule 5550(b)(2), or maintain compliance with any other listing requirements.

Key Factors that Affect Operating Results

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

Tariff and Customer Demand

Our sales decrease was primarily driven by lower order volumes. During the year ended June 30, 2026, tariffs imposed on imported goods, together with uncertainty regarding their scope and duration, resulted in significant volatility in our landed costs and selling prices. In response, certain customers deferred or reduced purchase commitments pending greater pricing clarity, which negatively affected order volumes and sales.

Product Costs and Pricing

A significant increase in memory chip prices increased our product costs during the year ended June 30, 2026. In response, we increased our selling prices in an effort to preserve gross margins. However, our customers did not accept the higher prices to the extent we anticipated, which contributed to lower order volumes and further reduced sales. Changes in product costs and our ability to adjust selling prices accordingly may continue to affect our gross margins and operating results.

Macroeconomic Conditions and Consumer Demand

Our operating results are also affected by broader macroeconomic conditions, including sustained inflation and its impact on consumer purchasing power. Inflation and reduced consumer purchasing power contributed to a longer mobile phone replacement cycle, which we believe has extended from approximately one to two years to more than two years. A longer replacement cycle may reduce consumer demand for mobile phones and related products and, consequently, adversely affect our sales and operating results.

Retention of Key Management Team Members

One of the key differentiating factors of ours is the rich blended nature of our management team. Our management team comprises executives with extensive sales, marketing, and R&D experience in telecommunication industry and consumer electronics industry. The wide array of industry experience captured by our management team allows us to deliver advanced technology and superior products to our customers. Losing any member of our key executive team could significantly impact on the quality of services and products that we currently offer. Such departures may prompt customers to explore alternative products or IoT cloud platforms offered by different vendors or service providers.

Investment in technology and talent

We invest significant resources in outsourcing partnerships and dedicate efforts to research and develop new products, solutions, agent platforms, and related services. This commitment is essential to uphold our competitiveness in the industry, especially in the realm of IoT services. Advancing technology and enhancing capabilities are pivotal for enterprise growth, necessitating continual progress in electronic product technologies, novel services, and expanded capabilities.

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

In addition, in January 2026, we entered into a research and development agreement with a third-party service provider, pursuant to which the provider will render technical development services for the operating system used in our mobile phone products. Under the agreement, the provider will: (i) develop a customized cross-platform inheritance framework for the operating system to enable compatibility and adaptation across multiple platforms and operating systems; (ii) establish a unified compatibility and integration framework for system modules and applications in order to support overall system stability and interoperability; (iii) optimize core applications for multi-platform adaptation to improve system performance, operating smoothness, and user experience; (iv) develop proprietary applications, including a mobile manager, home screen, and browser, and integrate them into the operating system; (v) integrate and validate advertising and paid-service business modules to confirm their functionality, regulatory compliance, and security; and (vi) perform system and UX/UI design and implementation to improve visual design and user interaction and to maintain a consistent overall style. All intellectual property developed under the agreement will be owned by the Company.

Our ability to expand our products and services and diversify customer base

Currently, our main revenue stream originates from the sale of tablets and mobile phones. As brand recognition and acceptance grow, we anticipate a surge in user adoption of our wireless services and intelligent products. Our capacity to broaden our products portfolio, offer new services and attract a more diversified customer base could significantly influence our future operating results.

Results of Operations

Comparison for the years ended June 30, 2026 and 2025

Revenues

Our revenue is primarily derived from sales of electronic products. The total revenues decreased by approximately $13.3 million, or 20.2%, to approximately $52.6 million for the year ended June 30, 2026 as compared to $65.9 million for the year ended June 30, 2025. The decrease of the total revenue was mainly attributable to the decreases in revenue across nearly all categories, which collectively accounted for 98% of our sales, with the exception of tablet products. The decrease was more pronounced in the second half of the year ended June 30, 2026, with approximately $9.7 million decrease occurring during the second half. The decline was primarily driven by the declined consumer demand and lower order value due to our intention of increasing selling prices in response to higher costs driven by rising chip prices, tariffs and related pricing uncertainty. The significant decline in sales in the second half of the year ended June 30, 2026 may continue to pressure our sales and gross margins in the near term if these conditions persist. We will continue to monitor customer demand, product costs, tariffs, and pricing conditions and adjust our strategies accordingly.

Our revenues from our revenue categories are summarized as follows:

Tablet product sales were insignificant in our operations for the year ended June 30, 2026. Revenue from the sales of tablets increased by approximately $0.4 million, or 82.6%, to approximately $0.9 million for the year ended June 30, 2026 from $0.5 million for the same period in 2025. Revenue from sales of phones decreased by approximately $12.7 million, or 21.2%, to approximately $47.0 million for the year ended June 30, 2026 from $59.7 million for the same period in 2025 as the consumers’ spending power was weakened and the mobile phone replacement rate was lowered. Previously, consumers tended to replace their phones every more often between 1 to 2 years, whereas now many keep the same device for over 2 years. This decrease was also attributed to lower order volumes, resulting from our intention of increasing selling prices in response to higher costs driven by rising chip prices. Revenue from sales of wearable products and others decreased by approximately $0.4 million, or 11.5%, to approximately $3.0 million for the year ended June 30, 2026 from $3.4 million for the year ended June 30, 2025, as the consumers’ spending power was weakened and the demands of the wearable products were lowered during the year ended June 30, 2026. Revenue from App service commission decreased by approximately $0.6 million, or 27.1%, to approximately $1.6 million for the year ended June 30, 2026 from $2.2 million for the year ended June 30, 2025, as the sales of phones decreased and the consumers’ spending power was weakened. Revenue from other services was income generated by our other logistic and warehouse management and MVNO services and it was insignificant in our operations for the year ended June 30, 2026 and 2025.

Cost of Goods Sold

Our cost of goods sold mainly consists of cost of merchandise and freight. Total cost of goods sold decreased by approximately $11.4 million, or 18.7%, to approximately $49.71 million for the year ended June 30, 2026 as compared to $61.1 million for the year ended June 30, 2025. The decrease in cost of goods sold is a direct result of a decrease in our revenue, consistent with the decrease in mobile phone production costs, which accounted for 92% of our cost of goods sold.

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

24

Our cost of goods sold for tablets increased by approximately $0.4 million, or 73.5%, to approximately $0.8 million for the year ended June 30, 2026 from approximately $0.4 million for the same period in 2025, consistent with the increase in sales of tablets. Cost of goods sold for mobile phone products decreased by approximately $11.1 million, or 19.2%, to approximately $46.5 million for the year ended June 30, 2026 from approximately $57.6 million for the same period in 2025, which is consistent with the direct result of a decrease in our revenue. The decrease is also attributable to the decrease in unit cost as we negotiated with our vendor to cover shipping and tariff costs beginning in July 2025 offset by the increase of inventory impairment related to slow-moving inventory of approximately $5.8 million. Cost of goods sold for wearable products and others increased by approximately $0.6 million, or 17.9%, to approximately $3.6 million for the year ended June 30, 2026 from $3.0 million for the same period in 2025, which is primarily due to inventory impairment related to slow-moving inventory of approximately $1.0 million. Cost of other services was insignificant in our operations for the years ended June 30, 2026 and 2025.

Gross Profit

Our gross profit decreased by approximately $3.1 million, or 64.6%, to approximately $1.7 million for the year ended June 30, 2026, from $4.8 million for the year ended June 30, 2025.

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

For the years ended June 30, 2026 and 2025, our overall gross profit percentage was 3.2% and 7.2%, respectively. The decrease in gross profit percentage of 4.0% was primarily due to the decrease in gross profit percentage across nearly all categories, which collectively accounted for 90% of our gross profit, with the exception of tablet, attributable to inventory impairment, tariffs and related pricing uncertainty, and product costs. In addition, approximately 96.4% of the Company’s purchases were made from one major supplier, and changes in the supplier’s pricing and supply conditions may significantly affect the Company’s product costs and gross profit margin. The Company sought to increase selling prices to mitigate higher costs, but the customers did not accept the higher prices, limiting the Company’s ability to offset these cost increases.

Gross profit percentage of tablets increased from 14.1% for the year ended June 30, 2025 to 18.4 % for the same period in 2026. This was primarily due to the decrease in sales of those with higher unit selling prices and lower unit purchase prices, and the reduction of shipping and tariff costs as we negotiated with our vendor to cover such costs.

Gross profit percentage for mobile phones decreased from 3.5% for the year ended June 30, 2025 to 1.0% for the same period in 2026. This was primarily due to the inventory impairment related to slow-moving inventory of approximately $5.8 million.

Gross (loss) profit percentage for wearable products and others decreased from 11.7% for the year ended Juen 30, 2025 to (17.6) % for the same period in 2026. This was primarily due to the increasing sales of products with lower gross profit margins and the inventory impairment related to slow-moving inventory of approximately $1.0 million.

For the years ended June 30, 2026 and 2025, our gross profit percentage of App service commission was 100.0%. This high margin was primarily attributable to the nature of App service commission revenue, which was commission based revenue that was earned at a point in time when the revenue is generated from the App, that is when clicks and/or impressions, activation of Apps, and installation of additional Apps occur at a point in time when the end users of the mobile devices interact with those Apps. We earned the App revenue share (service commission) from our partners without incurring any direct cost, as the pre-installation expenses were included in the research and development expenses prior to installation, and any labor costs with minimal time spent were immaterial to be allocated to cost of revenue.

Gross (loss) profit percentage for other services decreased from 52.9% for the year ended June 30, 2025 to (51.4) % for the same period in 2026. Gross profit percentage for other services was insignificant in our operations for the years ended June 30, 2026 and 2025.

Operating Expenses

Total operating expenses increased by approximately $31.1 million, or 215.0%, to approximately $45.6 million for the year ended June 30, 2026, from approximately $14.5 million for the year ended June 30, 2025.

Our operating expenses are summarized as follows:

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

Selling Expenses

Selling expenses decreased approximately $1.2 million, or 23.5%, to approximately $4.0 million for the year ended June 30, 2026, from approximately $5.2 million for the year ended June 30, 2025. The decreased selling expenses was mainly attributable to approximately $1.1 million decrease in commission, payroll and payroll related expenses and approximately $0.7 million decrease in consulting fees during the year ended June 30, 2026, as we reduced salespersons and consultants to reduce expenses and streamline sales department. The decrease was offset by approximately $0.6 million increased in advertising and marketing expenses primarily due to the increased marketing investment in e-commerce channels.

General and Administrative Expenses

General and administrative expenses increased approximately $4.8 million, or 79.2%, to approximately $11.0 million for the year ended June 30, 2026 from approximately $6.2 million for the year ended June 30, 2025. The increased general and administrative expense were mainly attributable to the approximately $0.4 million increase in professional expense as we became a public company and incurred additional capital market and legal consulting fees, approximately $0.7 million increase in salary and wages as a result of allocating certain personnel compensation from selling expenses to general and administrative expenses, reflecting a change in the personnel’s primary responsibilities, approximately $3.6 million increase in rent due to the new warehouse leases that commenced in July 2025 and January 2026, and approximately $0.2 million increase in stock-based compensation expenses as we granted restricted stock units in November 2024 to our general and administrative team members under employee incentive plan.

Research and Development — related party

Research and development (“R&D”) expenses from a related party decreased by approximately $137,000, or 100.0%, where the decrease was primarily due to an R&D project which commenced in 2024 and was completed in June 2025. During the year ended June 30, 2025, a related party completed 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 $137,000 accordingly based on the progression of the R&D project. We did not have this expense for the same period in 2026.

Research and Development

R&D expenses increased by approximately $0.8 million, or 40.4%, from $2.1 million for the year ended June 30, 2025 to $2.9 million for the same period in 2026. The increase was primarily due to the R&D agreement entered into in January 2026 with a third party, under which the third party will provide technical development services for our operating system across three phases. During the year ended June 30, 2026, approximately 60% of the project has been completed and the Company recognized approximately $1.9 million of R&D expenses under this agreement, reflecting progress in development phase.

Provision of credit losses

Provision of credit losses increased by approximately $0.9 million, or 98.4%, from $0.9 million for the year ended June 30, 2025 to approximately $1.8 million for the same period in 2026. The increase was primarily due to continued aging of receivables, as well as our assessment of historical collection experience and probability of recovery from customers and customer groups.

Impairments of right-of-use assets

Impairments of right-of-use assets increased by approximately $25.9 million, or 100.0%, from $0 for the year ended June 30, 2025 to approximately $25.9 million for the same period in 2026. The increase was primarily attributable to impairment charges recognized following the change in our logistics management practice - the increase in dropship arrangements reduces the needs for warehousing space. As a result, our management decided to sublease our warehouse with lesser value as compared to our current lease payments, which indicated that the carrying amount of the right-of-use assets was not recoverable and exceeded their estimated fair value by approximately $25.9 million.

Other (expense) income, net

Our other expense, net is summarized as follows:

27

Total other (expense) income, net decreased by approximately $9.6 million, or 1,264.0%, to approximately $8.8 million of other expense, net for the year ended June 30, 2026, from approximately $0.8 million of other income, net for the year ended June 30, 2025. The decrease was primarily due to the increase of approximately $3.8 million interest expenses incurred related to the financing offered by our vendors based upon the timing of our payment to their accounts payable and the decrease of approximately $5.7 million of change in fair value of earnout liabilities as we no longer had earnout liabilities after June 30, 2025.

Provision for income taxes

The provision for income taxes was approximately $10,000 and $77,000 for the years ended June 30, 2026 and 2025, respectively, representing a decreased of approximately $66,000 or 86.6%. The decrease was primarily attributed to the increase in net loss during the year ended June 30, 2026 and the absence of non-taxable gain of change in fair value of earnout liabilities of approximately 5.7 million recognized during the year ended June 30, 2025.

Net Loss

Net loss increased by approximately $43.7 million, or 483.9%, to approximately $52.7 million for year ended June 30, 2026, from approximately $9.0 million for the year ended June 30, 2025. Such change was mainly due to the reasons discussed above.

Foreign Currency Translation Adjustment

Changes in foreign currency translation adjustment of approximately $7,000 are mainly due to the fluctuation of foreign exchange rates between SGD and MXN (the functional currencies of two of our subsidiaries) and the USD dollar (reporting currency) for the year ended June 30, 2026.

Liquidity and Capital Resources

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

As of June 30, 2026, we had cash and restricted cash of approximately $1.5 million, while we had working capital deficit of approximately $34.1 million and accumulated deficit of approximately $72.7 million. During the year ended June 30, 2026, we had net loss of approximately $52.7 million and net operating cash outflow of approximately $0.4 million.

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

• Other available sources of financing from banks, other financial institutions or private lenders;
• Financial support and credit guarantee commitments from our related parties; and
• Equity financing.

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

The following summarizes the key components of cash flows for the years ended June 30, 2026 and 2025.

Operating activities

Net cash used in operating activities was approximately $0.4 million for the year ended June 30, 2026 and was primarily attributable to (i) approximately $52.7 million net loss, (ii) approximately $1.7 million payment in operating lease liabilities as we commenced our warehouse leases in July 2025 and January 2026, (iii) approximately $0.6 million increase in accounts receivable due to the increase of credit sales during the year, and (iv) approximately $0.3 million decrease in other payable – related parties primarily due to the repayment of unconverted working capital loan balance. The cash outflow was offset by (v) non-cash expenses of approximately $37.9 million, which includes depreciation, amortization of operating right-of-use assets, stock-based compensation, impairment of inventories, impairments of right-of-use assets, and provision of credit losses, net, (vi) approximately $7.3 million increase in accounts payable due to increased purchases for dropship orders, (vii) approximately $4.3 million increase in other payables and accrued liabilities as we committed to repaying supply chain finance interests and the recognition of obligations to pay R&D expenses under milestone-based installments pursuant to the R&D agreement entered into in January 2026, (viii) approximately $2.4 million decrease in inventories as we engaged in dropship arrangement beginning in July 2025 where products were shipped directly to our customers rather than stored in our warehouse as inventory, (ix) approximately $1.0 million decrease in prepaid expenses and other current assets due to the collection of prepayment refund from canceled purchase orders and the utilization of prepaid rent following the commencement of warehouse leases in July 2025 and January 2026, and (x) approximately $1.9 million increase in contract liabilities.

Net cash used in operating activities was approximately $6.6 million for the year ended June 30, 2025 and was primarily attributable to (i) approximately $9.0 million in net loss, (ii) approximately $10.9 million increase in inventories because we stored more inventories to meet the demand of our anticipated sales orders, (iii) approximately $7.1 million increase in accounts receivable due to the increase of credit sales during the period, (iv) non-cash expenses of approximately $5.7 million, which primarily attributed to the change in fair value of earnout liabilities, (v) approximately $2.0 million increase in prepaid expenses and other current assets due to our prepaid rent payment in connection with our factory and warehouse leases to be commenced in July 2025, (vi) approximately $1.1 million increase in security deposit because we rented more office, factory and warehouse space which were commenced in July 2025, (vii) approximately $0.2 million decrease in tax payable of ACAC due to the payment of income tax carried from ACAC after the Business Combination, and (viii) approximately $0.6 million decrease in contract liabilities due to purchase of more inventories with vendors to meet customer demand. The cash outflow was offset by (i) approximately $24.8 million increase in accounts payable due to purchase of more inventories with vendors to meet customer demand, (ii) approximately $2.4 million increase 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, (iii) approximately $1.2 million decrease in advance to suppliers due to purchase of more inventories with vendors to meet customer demand, (iv) approximately $0.8 million increase in non-cash stock compensation due to restricted stock units granted to our employees, consultants and independent director under the Incentive Plan, and (v) approximately $0.9 million provision for credit losses due to the increasing risk of uncollectable accounts from a few of our customers.

Investing activities

Net cash provided by investing activities was approximately $9,000 for the year ended June 30, 2026, attributable to the proceeds from sale of equipment.

Net cash used in investing activities was approximately $40,000 for the year ended June 30, 2025, attributable to approximately $68,000 purchase of some equipment for our warehouse uses and an automobile for our business uses, and offset by approximately $28,000 proceeds from sale of the automobile.

Financing activities

Net cash used in financing activities was approximately $37,000 for the year ended June 30, 2026, mainly attributable to the principal payments of long-term loan of approximately $24,000 and the payments for employee taxes related to stock compensation of approximately $13,000.

Net cash provided by financing activities was approximately $7.9 million for the year ended June 30, 2025, mainly attributable to (i) approximately $19.7 million of proceeds from the reverse recapitalization, (ii) $9.0 million of proceeds from issuance of convertible promissory notes, and (iii) approximately $0.1 million of proceeds from issuance of common stock through exercise of warrant, offset by the payment of redeeming shareholders in connection with the Business Combination of approximately $20.5 million, the repayment of short-term loans of approximately $0.3 million and approximately $0.1 million in payments of deferred transaction costs.

Off-Balance Sheet Arrangements

As of June 30, 2026, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our members.

Critical Accounting Estimates

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

Allowance for Credit Losses

In establishing the required allowance for credit loss accounts, we consider historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history and financial condition of the customers. Management reviews its receivables on a regular basis to determine if the allowance for credit loss accounts is adequate and adjusts the allowance when necessary. Delinquent account balances are written off against allowance for credit loss accounts after management has determined that the likelihood of collection is not probable. The allowance for credit losses is based on a review of specifically identified customer accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the collectability of accounts receivable within each pool based on historical experience, current payment practices and current economic trends based on our expectations over the expected life of the receivable, which is generally ninety days or less. With our accounts receivable balances, management would estimate its expected credit losses using an aging method with a baseline reserve percentage with the additional consideration of current industry and economic trend. Although actual losses have not differed materially from our previous estimates, future losses could differ from our current estimates. As of June 30, 2026 and 2025, $1,888,104 and $595,907, respectively, of allowance for credit losses of accounts receivable was recorded, and the Company had net accounts receivable of $6,099,537 and $6,786,792, respectively.

Income Taxes

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

Inventory Impairment

Inventory impairment is recognized to state our inventories at the lower cost or net realizable value. At least a quarterly basis, inventories are reviewed for potential write-downs for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories and the estimated net realizable value. Net realizable value is determined based on management’s estimates of selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. These estimates require significant judgement and are based upon past sales experience, forecasts for future demand, market conditions, and other relevant factors. During the years ended June 30, 2026 and 2025, inventory write-downs of $6,981,771 and $0, respectively, were recorded based on management’s estimates.

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

Impairment of long-lived assets

The impairment of long-lived assets is reviewed on an annual basis and whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. During the period, management identified certain impairment indicators for right-of-use assets, including a current period loss, a history of losses, and management’s decision to sublease our warehouse. These factors required management to assess whether the carrying value of the asset group was recoverable. Recoverability is assessed by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to result from the use and eventual disposition of the assets. The right-of-use assets were determined to be impaired and the impairment recognized was the excess of the carrying amount over the fair value of the assets. Fair value was determined by the discounted cash flow method. The approach for determining and measuring impairment in long-lived asset groups is to exclude operating lease liabilities from the asset group. The discount rate used in the estimate of discounted cash flows is 8.70%, consistent with our incremental borrowing rate as of January 1, 2026, because from market participant and sublease standpoint as the interest rate in the market, our credit environment and market spreads have held steady with no change since January 1, 2026. These estimates are subject to significant uncertainty, particularly with respect to assumptions used in forecasting future cash flows. Changes in these assumptions could materially affect the estimated fair value and the amount of impairment recognized. For example, a decrease in projected sublease income or occupancy rates could result in additional impairment charges. Management believes the assumptions and methodology used are reasonable and consistent; however, these estimates may change in the near term as market conditions, sublease arrangements, and the Company’s business strategy evolve. During the years ended June 30, 2026 and 2025, the Company recognized approximately $25.9 million and $0 impairment of long-lived assets, respectively.

Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and our chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2026, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, during the period covered by this report, our disclosure controls and procedures were not effective due to the identified material weakness described below.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Annual Report on Internal Control over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at June 30, 2026. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of June 30, 2026 due to the material weaknesses in the design or operation of internal controls which could adversely affect our ability to record, process, summarize, and report financial data, which includes:

• Lack of sufficient segregation of duties due to limited resources;
• Lack of adequate design of controls and proper documentation needed in order to demonstrate that controls in place are operating effectively for significant transaction classes;
• Inability to prepare complete and accurate financial statements in accordance with GAAP in a timely manner;
• Inappropriate implementation of controls over the identification of related party transactions;
• Lack of appropriate design of controls over the completeness and accuracy of App services revenue; and
• lack of implementation of controls in determining an appropriate incremental borrowing rate for leases to ensure consistent application of a formal methodology aligned with the requirements of ASC 842.

Following the identification of the material weakness, we plan to take remedial measures including:

• hiring more qualified accounting personnel with relevant GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework;
• implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; and
• establishing internal audit function by engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley Act compliance requirements and improvement of overall internal control.

This Annual Report on Form 10-K does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the year ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than those described above in our remediation efforts.