Foxx Development Holdings settles lawsuit with corporate amendment

Foxx Development Holdings Inc. (NASDAQ:FOXX), a computer communications equipment company with a market capitalization of $29.1 million and current stock price of $4.53, has agreed to amend its corporate charter in response to a class action lawsuit. According to InvestingPro data, the company maintains a healthy balance sheet with more cash than debt, despite facing profitability challenges in recent quarters. The lawsuit, filed on November 22, 2024, by Ximena Semensato, challenged the validity of a provision waiving the corporate opportunity doctrine in the company’s Amended and Restated Certificate of Incorporation.

The Delaware Chancery Court case, Semensato v. Foxx Development Holdings Inc., et al., No. 2024-1200, named both the company and certain individual defendants, including Joy Yi Hua, Haitao Cui, Jeff Feng Jiang, Eva Yiqing Miao, and Edmund R. Miller. Semensato sought a declaration that the waiver was invalid and an injunction against enforcement of the waiver, in addition to attorneys’ fees and other costs. This legal challenge comes as the company faces financial headwinds, with InvestingPro analysis showing weak gross profit margins of 6.06% and negative EBITDA of -$6.04 million in the last twelve months.

Foxx Development Holdings and the individual defendants have denied any wrongdoing. However, the Board of Directors decided that amending the charter would be more advantageous for the company and its shareholders than continuing the litigation. The Board has approved the Second Amended and Restated Certificate of Incorporation and plans to present the amendment for stockholder approval at the next annual meeting.

As part of the settlement, Foxx Development Holdings will inform the plaintiff of the Board’s decision, and it is anticipated that Semensato will voluntarily dismiss the lawsuit as moot, pending the court’s approval.

The amendment represents a significant corporate governance change for Foxx Development Holdings, which is headquartered in Irvine, California. The company’s common stock and warrants are traded on The Nasdaq Stock Market under the symbols FOXX and FOXXW, respectively.

This development comes as the company, designated as an emerging growth company, continues to navigate the complexities of corporate law. The resolution of this legal matter allows Foxx Development Holdings to focus on its core business activities without the distraction of ongoing litigation. Recent market data from InvestingPro shows the stock has experienced significant volatility, with a 13.25% gain in the past week despite a 61.28% decline over the last six months. The company’s Fair Value analysis suggests it is currently trading near its fair value, while additional ProTips indicate both challenges and opportunities ahead.

The information for this article is based on a press release statement.

In other recent news, Foxx Development Holdings has announced a change in its board of directors. The company accepted the resignation of Mr. Jeff Feng Jiang, who stepped down for personal reasons, with no disagreements related to company operations or policies. In his place, Foxx Development Holdings appointed Mr. John Chiang as a new board director and chair of the nomination and corporate governance committee. Mr. Chiang brings a wealth of experience from both public and private sectors, including his tenure as the State Treasurer of California and board positions at several companies. His involvement with organizations such as Astrana Health, Chijet Motor Company, and Deep Medicine Acquisition Corp. highlights his diverse expertise. As part of his new role, Mr. Chiang will receive an annual director fee of $100,000, with an indemnification agreement also in place. The company confirmed there are no familial relationships or transactions involving Mr. Chiang that require disclosure under SEC regulations. This development is part of Foxx Development Holdings’ ongoing efforts in the competitive computer communications industry.

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