Xiao-I Corporation

On or about March 9, 2023, Xiao-I conducted its IPO, issuing 5.7 million ADSs to the public at the Offering price of $6.80 per ADS for gross proceeds of $38.76 million.

On September 25, 2023, Xiao-I issued a press release announcing inter alia, a net loss of $18.8 million for the first half of 2023, and revealing that its “[t]otal operating expenses” increased 355% year over year, and R&D expenses “grew by 708% year over year.” On this news, Xiao-I’s ADS price fell $2.70, or 14.22%, to close at $16.29 per ADS on September 25, 2023.

Then, on April 30, 2024, Xiao-I revealed, inter alia, FY 2023 revenues of $59.2 million as well as a net loss of $27 million, noting “[R&D] expenses . . . grew by 118.3% year over year.”  On this news, Xiao-I’s ADS price fell $0.72, or 6.15%, to close at $10.98 per ADS on April 30, 2024.

Finally, on July 15, 2024, Xiao-I announced it “received a notification letter dated July 11, 2024 (the ‘Deficiency Letter’) from the Listing Qualifications Department of [t]he [NASDAQ], indicating that the Company is no longer in compliance with the minimum bid price requirement[.]” On this news, Xiao-I’s ADS price fell $0.13, or 2.28%, to close at $5.99 per ADS on July 15, 2024.

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, the Offering Documents and Defendants failed to disclose to investors that: (1) Defendants had downplayed the true scope and severity of risks that Xiao-I faced due to certain of its Chinese shareholders’ non-compliance with Circular 37 Registration, including the Company’s inability to use Offering proceeds for intended business purposes; (2) Xiao-I failed to comply with GAAP in preparing its financial statements; (3) Defendants overstated Xiao-I’s efforts to remediate material weaknesses in the Company’s financial controls; (4) Xiao-I was forced to incur significant R&D expenses to effectively compete in the AI industry; (5) Xiao-I downplayed the significant negative impact that such expenses would have on the Company’s business and financial results; (6) accordingly, Xiao-I overstated its AI capabilities, R&D resources, and overall ability to compete in the AI market; (7) as a result of all the foregoing, there was a substantial likelihood that Xiao-I would fail to comply with the NASDAQ’s Minimum Bid Price Requirement; and (8) as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.