NEW YORK--(BUSINESS WIRE)--The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Southern District of New York on behalf of those who acquired Xiao-I Corporation (“Xiao-I” or the “Company”) (NASDAQ: AIXI) (a) American depository shares (“ADSs”) issued in connection with the Company’s initial public offering conducted on or about March 9, 2023 (the “IPO” or “Offering”); and/or (b) securities between March 9, 2023 and July 12, 2024, inclusive (the “Class Period”). Investors have until December 16, 2024, to apply to the Court to be appointed as lead plaintiff in the lawsuit.
[Click here to learn more about the class action]
On September 25, 2023, Xiao-I issued a press release announcing its unaudited and unreviewed financial results for the first half of 2023, reporting a net loss of $18.8 million, compared to a net income of $0.6 million for the same period in 2022. Xiao-I disclosed that its total operating expenses for the first half of 2023 were $34.1 million, marking a 355% increase year-over-year from $7.5 million in 2022. While the Company noted improved efficiency in selling, general, and administrative expenses due to business growth, it stated that this improvement could not offset the 708% year-over-year rise in research and development (“R&D”) expenses. On this news, Xiao-I’s ADS price declined by $0.30 per ADS, or approximately 14.22%, to close at $1.81 per ADS on September 25, 2023.
On October 20, 2023, Xiao-I issued another press release, this time announcing its unaudited but reviewed financial results for the first half of 2023. The Company explained that the 708% increase in R&D expenses was primarily driven by a significant rise in professional service fees, including costs for supercomputing services, data services, intelligent computing technology, and software outsourcing, largely related to a big data model development project and other cloud platform products. Additionally, the Company noted that the November 2022 launch of OpenAI’s ChatGPT had accelerated its investment in AI+ Industrial Internet R&D. On this news, Xiao-I’s ADS price declined by $0.03 per ADS to close at $1.65 per ADS on October 20, 2023.
On April 30, 2024, Xiao-I released a press statement announcing its unaudited financial results for the full year 2023, including revenues of $59.2 million, falling short of consensus estimates by $30.08 million. The Company also reported a net loss of $27 million for 2023, compared to a net loss of $6 million in 2022. Xiao-I revealed that its total operating expenses increased by 80.7% from 2022. While efficiency in selling, general, and administrative expenses improved with business growth, the Company noted that it was unable to offset the 118.3% year-over-year increase in R&D expenses. On this news, Xiao-I’s ADS price declined by $0.08 per ADS, or approximately 6.2%, to close at $1.22 per ADS on April 30, 2024.
On July 15, 2024, Xiao-I issued another press release announcing that it had received a notification letter from NASDAQ’s Listing Qualifications Department on July 11, 2024, informing the Company that it was no longer in compliance with the minimum bid price requirement outlined in NASDAQ Listing Rule 5450(a)(1), as the company’s ADS closing bid price had been below $1.00 for 30 consecutive business days. On this news, Xiao-I’s ADS price declined by approximately 2.28% to close at $0.67 per ADS on July 15, 2024.
The lawsuit alleges that Xiao-I failed to disclose that: (i) the Company 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; (ii) Xiao-I failed to comply with GAAP in preparing its financial statements; (iii) Company employees overstated Xiao-I’s efforts to remediate material weaknesses in the Company’s financial controls; (iv) Xiao-I was forced to incur significant R&D expenses to effectively compete in the AI industry; (v) Xiao-I downplayed the significant negative impact that such expenses would have on the Company’s business and financial results; (vi) accordingly, Xiao-I overstated its AI capabilities, R&D resources, and overall ability to compete in the AI market; and (vii) 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.
If you purchased or otherwise acquired Xiao-I securities, have information, or would like to learn more about this investigation, please contact Thomas W. Elrod of Kirby McInerney LLP by email at investigations@kmllp.com, or by filling out this CONTACT FORM, to discuss your rights or interests with respect to these matters without any cost to you.
Kirby McInerney LLP is a New York-based plaintiffs’ law firm concentrating in securities, antitrust, whistleblower, and consumer litigation. The firm’s efforts on behalf of shareholders in securities litigation have resulted in recoveries totaling billions of dollars. Additional information about the firm can be found at Kirby McInerney LLP’s website.
This press release may be considered Attorney Advertising in some jurisdictions under the applicable law and ethical rules.
