Kirby McInerney LLP Files Class Action Lawsuit on behalf of Xiao-I Corporation Investors.

Kirby McInerney LLP filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of persons who purchased American Depository Shares (ADSs) of Xiao-I Corporation (NASDAQ: AIXI) during its initial public offering (IPO) on or about March 9, 2023 who purchased securities from March 9, 2023 to July 12, 2024. Investors interested in becoming lead plaintiff must file motions with the Court by December 16, 2024.

Overview of current financial performance

On September 25, 2023, Xiao-I announced its unaudited financial results for the first half of 2023, which reported a net loss of $18.8 million, compared to a net profit of $0.6 million in the same period in 2022 . The company reported total operating expenses of $34.1 million, a staggering 355% increase year-over-year. Although Xiao-I noted improvements in selling, general and administrative expenses, they were not enough to offset a 708% increase in research and development (R&D) expenses. Following this announcement, the price of Xiao-I's ADS fell approximately 14.22% to close at $1.81.

On October 20, 2023, the Company provided further details on its increasing research and development costs, attributing them to increased professional services fees related to a large big data modeling initiative. This increase was influenced by OpenAI's launch of ChatGPT in November 2022, which led Xiao-I to accelerate its investments in AI and industrial internet research. After this announcement, the ADS price fell to $1.65.

Year-End Financial Results and NASDAQ Announcement

On April 30, 2024, Xiao-I released its unaudited full-year 2023 financial performance, reporting revenue of $59.2 million – $30.08 million below market expectations. The company reported a net loss of $27 million, a significant increase from the loss of $6 million in 2022. Despite improvements in operational efficiency, total operating costs increased 80.7% year-over-year, driven primarily by research and development costs. Following this announcement, the ADS price fell to $1.22.

On July 15, 2024, Xiao-I announced that it had received a notification from NASDAQ This indicates that the minimum bid price requirement was not met because the ADS closing price was below $1.00 for 30 consecutive business days. In response, the ADS price fell to $0.67.

Allegations in the lawsuit

The lawsuit claims that Xiao-I failed to disclose important information, including:

1. The extent of the risks associated with non-compliance with Circular 37 registration by certain Chinese shareholders.
2. Failure to comply with GAAP standards in the preparation of financial reports.
3. Exaggerated claims about efforts to address weaknesses in financial controls.
4. The need for significant R&D costs to remain competitive in the AI ​​sector.
5. The significant negative impact of these expenses on business performance.
6. Inflated claims about AI capabilities and research and development resources.
7. The risk of not meeting the NASDAQ minimum bid price requirement.

Contact information

If you have purchased or acquired Xiao I securities, have relevant information, or would like to learn more about this investigation, please contact Thomas W. Elrod of Kirby McInerney LLP free of charge at [email protected] to discuss your rights .

Kirby McInerney LLP is a New York-based plaintiffs' law firm focused on securities, antitrust, whistleblower and consumer litigation. The company has secured billions of dollars in repayments for shareholders in securities disputes. For more information about the firm, please visit Kirby McInerney LLP's website: http://www.kmllp.com

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