AIXI XIAO I Corporation

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of October 2024

 

Commission File Number 001-41631

 

Xiao-I Corporation

(Translation of registrant’s name into English)

 

5/F, Building 2, No. 2570

Hechuan Road, Minhang District

Shanghai, China 201101

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F ☒             Form 40-F ☐

 

 

 

INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K

 

On October 28, 2024, Xiao-I Corporation (“Xiao-I”) released its unaudited semi-annual report for the six months ended June 30, 2024, which report is furnished as Exhibit 99.1 to this Report on Form 6-K.

 

On June 26, 2024, a putative securities class action lawsuit was filed in the Supreme Court of the State of New York, naming Xiao-I Corporation (the “Company”), Hui Yuan, Wei Weng, Wenjing Chen, Xiaomei Wu, Jun Xu, Zhong Lin, and H. David Sherman, among others, as defendants.  The case is captioned Milev v. Xiao-I Corporation et al., Index No. 653294/2024.  The initial complaint alleged violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) based on allegedly false and misleading statements and material omissions in the registration statement and prospectus the Company issued in connection with its March 13, 2023 initial public offering (the “Offering Documents”). On September 13, 2024, the plaintiff filed an amended class action complaint against the same defendants.  The amended complaint alleges violations of Sections 11 and 15 of the Securities Act based on purportedly false and misleading statements and material omissions in the Company’s Offering Documents.  Specifically, it alleges that the Company did not disclose certain line items in its statement of comprehensive income in violation of Section 210.5-03 of Regulation S-X. The purported class in the amended complaint includes all persons who purchased or otherwise acquired Xiao-I securities in the initial public offering, or who purchased Xiao-I securities thereafter pursuant and/or traceable to the Offering Documents.  Defendants will move to dismiss the amended complaint on or before October 31, 2024.  While the Company cannot predict the outcome of this matter, it believes the putative class action to be without merit and plans to vigorously defend itself.  At this time, we cannot reasonably estimate the maximum potential exposure or the range of possible loss for this matter.

 

On October 15, 2024, a putative securities class action was filed in the United States District Court for the Southern District of New York, naming Xiao-I Corporation (the “Company”) and certain of its officers and directors, among others, as defendants.  The case is captioned Yunfan Fan v. Xiao-I Corporation et al., 24-cv-07837.  The operative complaint alleges violations of Sections 11 and 15 of the Securities Act of 1933 as well as violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint alleges that Xiao-I’s Registration Statement and Prospectus filed in conjunction with its March 9, 2023 initial public offering (together, the “Offering Documents”), as well as certain of its subsequent periodic reports, contained material misstatements and/or omissions concerning: (i) certain of the Company’s Chinese stockholders’ compliance with Circular 37 Registration; (ii) the Company’s compliance with GAAP; (iii) the Company’s efforts to remediate disclosed material weaknesses in its controls over financial reporting; (iv) the impact of the Company’s research and development expenses on its business and financial results; and (v) the Company’s compliance with the NASDAQ's Minimum Bid Price Requirement. The purported class in the operative complaint includes all persons who purchased Xiao-I securities either (i) pursuant and/or traceable to the Offering Documents and/or (ii) between March 9, 2023 and July 12, 2024.  Motions for appointment as lead plaintiff must be filed on or before December 16, 2024.  As of the date of this filing, Xiao-I has not been formally served. While the Company cannot predict the outcome of this matter, it believes the putative class action to be without merit and plans to vigorously defend itself.  At this time, we cannot reasonably estimate the maximum potential exposure or the range of possible loss for this matter.

 

INCORPORATION BY REFERENCE

 

The Form 6-K and the exhibit to the Form 6-K, including any amendment and report filed for the purpose of updating such document, are incorporated by reference into the registration statements on Form S-8 (SEC File No. 333-275743) and Form F-3 of Xiao-I Corporation (the “Company”), as amended (SEC File No. 333-279306) (including any prospectuses forming part of such registration statements), and shall be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

 

 

EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release – Xiao-I Corporation Reports Unaudited 2024 First Half Financial Results

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 28, 2024	Xiao-I Corporation
	By:	/s/ Hui Yuan
		Name:	Hui Yuan
		Title:	Chief Executive Officer

 

Exhibit 99.1

 

Xiao-I Corporation Reports Unaudited 2024 First Half Financial Results

 

SHANGHAI, October 28, 2024 -- Xiao-I Corporation (NASDAQ: AIXI) (“Xiao-I” or the “Company”), a leading artificial intelligence company, today reported its unaudited financial results for the six months ended June 30, 2024.

 

Financial and Business Highlights:

 

●

Net Revenues: Xiao-I posted net revenues of $32.95 million for H1 2024, an increase from $26.48 million in H1 2023, representing a 24.5% YoY growth, driven primarily by strong contributions from Hua Zang LLM (large language model) and Technology Development Services.

●

Gross Margin: Gross margin declined to 64.5% in H1 2024, compared to 77.3% in H1 2023. The decrease was primarily due to the growing scale of Technology Development Services and the delivery phase of Hua Zang LLM, which incurs higher costs during pre-training and fine-tuning. However, once models enter the subscription phase, gross margins are expected to improve. Long-term gross margins are projected to stabilize at 60-70%.

●

Total Operating Expenses: Operating expenses increased slightly to $36.10 million in H1 2024, up from $34.10 million in H1 2023.

●

R&D Expenses: R&D expenses were reduced to $26.90 million in H1 2024 from $29.65 million in H1 2023, a 9.3% reduction, as AI systems reached maturity and development efforts became more efficient.

●

Net Loss: Xiao-I reported a net loss of $15.54 million in H1 2024, compared to $18.77 million in H1 2023.

 

Hua Zang LLM and Transition to MaaS:

 

Xiao-I’s Hua Zang LLM, with capabilities similar to ChatGPT, has been a key driver behind the Company’s growth in the first half of 2024. Corporations are prioritizing AI adoption, and we believe Hua Zang’s unique ability to deploy locally addresses critical security and confidentiality concerns. This advantage, particularly appealing to organizations managing sensitive information, has fueled the growth of the Company’s Model-as-a-Service (MaaS) solutions. By integrating customized AI models for large corporations, Xiao-I has established scalable, long-term revenue through a subscription-based approach. Additionally, the transition of its AI Chatbot clients from upfront licensing to MaaS has further contributed to predictable revenue streams.

 

Outlook for B2C and Overseas Expansion:

 

The Company is also enthusiastic about its B2C initiatives, particularly the Hearview AI glasses, which offer cutting-edge AI technology intended to assist individuals with hearing impairments. Xiao-I is committed to driving AI innovation in this market, with plans to expand its reach through strategic partnerships. Furthermore, the Company is actively exploring overseas opportunities engaging in ongoing discussions with potential clients in the U.S. for its Hua Zang LLM, which could position Xiao-I for significant international growth.

 

 

CEO’s Statement:

 

“Our performance in H1 2024 reflects the increasing demand for secure, customizable AI solutions, particularly in our Hua Zang LLM, which addresses key security concerns for our clients. We expect continued growth as we scale these services and transition more clients to our MaaS model,” said Mr. Hui Yuan.

 

Outlook for H2 2024:

 

Xiao-I maintains its full-year revenue projection of $73 million and expects stronger performance in the second half, driven by continued MaaS adoption and customized AI services. The Company anticipates that the net loss will be reduced through revenue growth and ongoing reduction in R&D expenses.

 

First Half 2024 Financial Results

 

Net Revenues

 

Net revenues were US$32.95 million for the first half of 2024, up 24.5% year over year from US$26.48 million for the same period of 2023, driven primarily by strong contributions from Hua Zang LLM and Technology Development Services.

 

By Revenue Type

 

By Product lines		2023H1				2024H1				% Change YoY
MaaS		$	22,958,930			$	24,768,850				7.9
Non-MaaS			3,516,489				8,184,915				132.8
Total		$	26,475,419			$	32,953,765				24.5

 

By Way of Delivery		2023H1				2024H1				% Change YoY
Sale of software products		$	535,004			$	102,705				(80.8	)
Sale of hardware products			30,175				2,539				(91.6	)
Technology development service			1,763,797				8,039,536				355.8
M&S service			1,426,784				670,959				(53.0	)
Sale of cloud platform products			22,719,659				24,138,026				6.2
Total		$	26,475,419			$	32,953,765				24.5

 

Cost of Revenues

 

Cost of revenues was US$11.69 million for the first half of 2024, up 94.6% year over year from US$6.01 million for the same period of 2023. The increase in the cost of revenue is primarily impacted by the larger scale of revenue.

 

Gross Profit

 

Gross profit was US$21.27 million for the first half of 2024, representing an increase of 3.9% year over year from US$20.47 million for the same period of 2023. Gross margin declined to 64.5% in H1 2024, compared to 77.3% in H1 2023.

 

The decrease was primarily due to the increased low margin business and the initial delivery of Hua Zang LLM. During the period, the revenue of Technology Development increased 355.8% to US$8.0 million, which has relatively low gross margin due to its business nature. And with the ramp-up phase of Hua Zang LLM incurs higher costs due to customization, fine-tuning, and deployment.

 

 

Operating Expenses

 

Total operating expenses were US$36.10 million in the first half of 2024, representing a slight increase of 5.9% year over year from US$34.10 million for the same period of 2023. Although the R&D expenses have gone down to US$2.75 million, it cannot offset the increment from general and administrative expenses of US$5.27 million. The major R&D investment finished with the delivery of Hua Zang LLM, which drove the R&D expenses to go down during the period. However, the Company has adjusted the staff structure due to the application of Hua Zang LLM in daily operation, which caused a temporary human optimization cost. The Company anticipate that with smaller coding team, higher productization and prompting team, the operation efficiency would enhance accordingly.

 

Net Loss

 

Net loss narrowed down to US$15.54 million for the first half of 2024, compared to US$18.77 million for the same period of 2023.

 

About Xiao-I Corporation

 

Xiao-I Corporation is a leading cognitive intelligence enterprise in China that offers a diverse range of business solutions and services in artificial intelligence, covering natural language processing, voice and image recognition, machine learning, and affective computing. Since its inception in 2001, the Company has developed an extensive portfolio of cognitive intelligence technologies that are highly suitable and have been applied to a wide variety of business cases. Xiao-I powers its cognitive intelligence products and services with its cutting-edge, proprietary AI technologies to enable and promote industrial digitization, intelligent upgrading, and transformation. For more information, please visit: www.xiaoi.com.

 

Forward-Looking Statements

 

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When The Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s ability to achieve its goals and strategies, the Company’s future business development and plans for future business development, including its financial conditions and results of operations, product and service demand and acceptance, reputation and brand, the impact of competition and pricing, changes in technology, government regulations, fluctuations in general economic and business conditions in China, and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the U.S. Securities and Exchange Commission (“SEC”). For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, including under the section entitled “Risk Factors” in its annual report on Form 20-F filed with the SEC on April 30, 2024, as well as its current reports on Form 6-K and other filings, all of which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

 

For investor and media inquiries, please contact:

Ms. Berry Xia

Email: ir@xiaoi.com

 

 

XIAO-I CORPORATION

CONDENSED CONSLIDATED BALANCE SHEETS

(In U.S. dollars, except for share and per share data, or otherwise noted)

 

		As of December 31, 2023				As of June 30, 2024
						(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	1,564,542			$	1,822,370
Restricted cash			20,676				27,107
Accounts receivable, net			28,326,985				47,052,282
Amounts due from related parties			-				157,616
Inventories			67,826				81,242
Contract costs			1,691,293				6,157,729
Advance to suppliers			1,149,642				1,317,003
Prepaid expenses and other current assets, net			5,233,553				4,837,217
Total current assets			38,054,517				61,452,566
Non-current assets:
Property and equipment, net			2,125,629				2,121,020
Intangible assets, net			212,445				161,666
Long-term investments			2,650,458				2,552,384
Right of use assets			2,431,475				1,130,594
Prepaid expenses and other non-current assets			7,000,357				6,604,234
Amount due from related parties-non-current			13,859,350				13,540,291
Total non-current assets			28,279,714				26,110,189
TOTAL ASSETS		$	66,334,231			$	87,562,755
Commitments and Contingencies
Liabilities
Current liabilities:
Short-term borrowings		$	26,760,940			$	33,023,723
Accounts payable			13,674,339				32,225,465
Amount due to related parties-current			704,947				206,716
Deferred revenue			1,654,145				7,562,248
Convertible loans			-				2,110,313
Derivative liabilities			-				163,958
Accrued expenses and other current liabilities			13,938,253				19,840,661
Lease liabilities, current			929,755				573,144
Total current liabilities			57,662,379				95,706,228
Non-current liabilities:
Amount due to related parties-non-current			7,905,290				7,177,872
Accrued liabilities, non-current			7,759,474				7,297,449
Lease liabilities, non-current			1,473,950				504,547
Total non-current liabilities			17,138,714				14,979,868
TOTAL LIABILITIES			74,801,093				110,686,096
Shareholders’ deficit
Ordinary shares (par value of $0.00005 per share; 1,000,000,000 shares and 1,000,000,000 shares authorized as of December 31, 2023 and June 30, 2024, respectively; 24,015,592 shares and 24,778,926 shares issued and outstanding as of December 31, 2023 and June 30, 2024, respectively)		$	1,201			$	1,239
Preferred shares (par value of $0.00005 per share; nil and 3,700,000 preferred shares authorized as of December 31, 2023 and June 30, 2024; 3,700,000 and 3,700,000 preferred shares issued and outstanding as of December 31, 2023 and June 30, 2024)			185				185
Additional paid-in capital			108,729,047				109,361,437
Statutory reserve			237,486				237,486
Accumulated deficit			(110,833,045	)			(126,333,034	)
Accumulated other comprehensive loss			(2,998,562	)			(2,815,101	)
XIAO-I CORPORATION shareholders’ deficit			(4,863,688	)			(19,547,788	)
Non-controlling interests			(3,603,174	)			(3,575,553	)
Total shareholders’ deficit			(8,466,862	)			(23,123,341	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$	66,334,231			$	87,562,755

 

 

XIAO-I CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In U.S. dollars, except for share and per share data, or otherwise noted)

 

		For the six months ended June 30,
		2023				2024
Sale of software products		$	535,004			$	102,705
Sale of hardware products			30,175				2,539
Technology development service			1,763,797				8,039,536
M&S service			1,426,784				670,959
Sale of cloud platform products			22,719,659				24,138,026
Net revenues			26,475,419				32,953,765
Cost of sale of software products			(368,021	)			(45,001	)
Cost of sale of hardware products			(26,118	)			(1,416	)
Cost of technology development service			(1,286,290	)			(5,429,050	)
Cost of M&S service			(805,948	)			(364,398	)
Cost of sale of cloud platform products			(3,519,521	)			(5,846,639	)
Cost of revenues			(6,005,898	)			(11,686,504	)
Gross profit			20,469,521				21,267,261
Operating expenses:
Selling expenses			(2,377,409	)			(1,862,535	)
General and administrative expenses			(2,070,052	)			(7,341,878	)
Research and development expenses			(29,649,703	)			(26,897,236	)
Total operating expenses			(34,097,164	)			(36,101,649	)
Loss from operations			(13,627,643	)			(14,834,388	)
Other loss:
Investment losses			(225,351	)			(37,326	)
Interest expenses			(1,570,847	)			(937,374	)
Fair value change of derivative liabilities			-				107,586
Other income, net			525,431				159,027
Total other loss			(1,270,767	)			(708,087	)
Loss before income tax expense			(14,898,410	)			(15,542,475	)
Income tax expenses			(3,871,118	)			-
Net loss		$	(18,769,528	)		$	(15,542,475	)
Net loss attributable to non-controlling interests			(173,782	)			(42,485	)
Net loss attributable to XIAO-I CORPORATION shareholders			(18,595,746	)			(15,499,990	)
Other comprehensive income
Foreign currency translation change, net of nil income taxes			507,422				253,567
Total other comprehensive income			507,422				253,567
Total comprehensive loss		$	(18,262,106	)		$	(15,288,908	)
Total comprehensive (loss)/income attributable to non-controlling interests			(76,331	)			27,621
Total comprehensive loss attributable to XIAO-I CORPORATION shareholders			(18,185,775	)			(15,316,529	)
Earnings/(Loss) per ordinary share attributable to XIAO-I CORPORATION shareholders
Basic			(0.80	)			(0.64	)
Diluted			(0.80	)			(0.64	)
Weighted average number of ordinary shares outstanding
Basic			23,308,370				24,049,072
Diluted			23,308,370				24,049,072

 

 

5

 

---