Kirby McInerney LLP Files Class Action Lawsuit for Xiao-I Corporation Investors

Kirby McInerney LLP Files Class Action Lawsuit for Xiao-I Corporation Investors.

Kirby McInerney LLP has filed a class action lawsuit in the U.S. District Court for the Southern District of New York on behalf of individuals who purchased American Depository Shares (ADSs) of Xiao-I Corporation (NASDAQ: AIXI) during its initial public offering (IPO) around March 9, 2023, as well as those who acquired securities from March 9, 2023, to July 12, 2024. Investors interested in becoming lead plaintiffs must submit their applications to the Court by December 16, 2024.

Overview of Recent Financial Performance

On September 25, 2023, Xiao-I announced its unaudited financial results for the first half of 2023, revealing a net loss of $18.8 million, compared to a net income of $0.6 million during the same period in 2022. The company reported total operating expenses of $34.1 million, reflecting a staggering year-over-year increase of 355%. Although Xiao-I noted improvements in selling, general, and administrative expenses, these were insufficient to offset a 708% rise in research and development (R&D) costs. Following this announcement, the price of Xiao-I’s ADS fell by approximately 14.22%, closing at $1.81.

On October 20, 2023, the company provided further details about its rising R&D expenses, attributing them to increased professional service fees related to a major big data model initiative. This surge was influenced by the launch of OpenAI’s ChatGPT in November 2022, which prompted Xiao-I to accelerate its investments in AI and Industrial Internet research. After this announcement, the ADS price declined to $1.65.

Year-End Financial Results and NASDAQ Notification

On April 30, 2024, Xiao-I published its unaudited financial performance for the entire year of 2023, reporting revenues of $59.2 million—$30.08 million short of market expectations. The company incurred a net loss of $27 million, a significant increase from the $6 million loss in 2022. Despite improvements in operational efficiency, the total operating expenses surged by 80.7% year-over-year, primarily driven by R&D costs. After this announcement, the ADS price fell to $1.22.

On July 15, 2024, Xiao-I revealed that it had received a notification from NASDAQ indicating it was not meeting the minimum bid price requirement, as its ADS closing price had remained below $1.00 for 30 consecutive business days. In response, the ADS price dropped to $0.67.

Allegations in the Lawsuit

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

The extent of risks related to certain Chinese shareholders’ non-compliance with Circular 37 Registration.
Non-adherence to GAAP standards in financial statement preparation.
Exaggerated claims about efforts to address weaknesses in financial controls.
The necessity of substantial R&D costs to remain competitive in the AI sector.
The significant negative impact of these expenses on business performance.
Inflated claims regarding AI capabilities and R&D assets.
The risk of not meeting NASDAQ’s Minimum Bid Price Requirement.

Contact Information

If you purchased or acquired Xiao-I securities, have relevant information, or want to learn more about this investigation, please contact Thomas W. Elrod of Kirby McInerney LLP at [email protected] to discuss your rights at no cost.

Kirby McInerney LLP is a New York-based plaintiffs’ law firm focused on securities, antitrust, whistleblower, and consumer litigation. The firm has secured billions of dollars in recoveries for shareholders in securities litigation. The additional information about the firm can be found at Kirby McInerney LLP’s website: http://www.kmllp.com