SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders with Losses on their Investment in Xiao-I Corporation of Class Action Lawsuit and Upcoming Deadlines - AIXI
NEW YORK, Nov. 10, 2024 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Xiao-I Corporation ("Xiao-I" or the "Company") (NASDAQ: AIXI) and certain officers and directors. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 24-cv-07837, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired: (a) Xiao-I American depository shares ("ADSs") pursuant and/or traceable to the Offering Documents (defined below) issued in connection with the Company's initial public offering conducted on or about March 9, 2023 (the "IPO" or "Offering"); and/or (b) Xiao-I securities between March 9, 2023 and July 12, 2024, both dates inclusive (the "Class Period"). Plaintiff pursues claims against the Defendants under the Securities Act of 1933 and the Securities Exchange Act of 1934.
If you are a shareholder who purchased or otherwise acquired Xiao-I ADSs pursuant and/or traceable to the Offering Documents issued in connection with the Company's IPO and/or Xiao-I securities during the Class Period, you have until December 16, 2024 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Danielle Peyton at [email protected] or 646-581-9980 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
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Xiao-I, through its subsidiaries, operates as a global artificial intelligence ("AI") company. The Company is incorporated in the Cayman Islands and headquartered in the People's Republic of China (the "PRC" or "China"). As a holding company with no material operations of its own, Xiao-I conducts most of its operations through its subsidiary Shanghai Xiao-i Robot Technology Co., Ltd. ("Shanghai Xiao-i"), which comprises the Company's AI business.
According to Xiao-I, "Shanghai Xiao-i has become a leading [AI] company by building on its wide technology commercialization, brand recognition and culture of innovation in China." Leading up to and following the IPO, Xiao-I consistently represented that Shanghai Xiao-i's purported industry-leading AI technologies and robust research and development ("R&D") resources distinguished the Company from its competitors.
Under Xiao-I and its subsidiaries' organizational structure, the Company transfers cash and other assets between itself and Shanghai Xiao-i through various intermediaries. The Company's ability to do so, however, is limited as a result of certain of its Chinese shareholders' non-compliance with applicable foreign exchange rules promulgated by China's State Administration of Foreign Exchange, particularly the "Circular on Issues Concerning Foreign Exchange Administration over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles" ("Circular 37"). Circular 37 imposes certain registration requirements on Chinese residents that contribute domestic assets or interests to offshore companies, known special purpose vehicles, as well as on foreign investment enterprises established by way of round-tripping ("Circular 37 Registration").
On December 20, 2022, Xiao-I filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission ("SEC") in connection with the IPO, which, after several amendments, was declared effective by the SEC on March 8, 2023 (the "Registration Statement").
On or about March 9, 2023, Xiao-I conducted its IPO, issuing 5.7 million of its ADSs to the public at the Offering price of $6.80 per ADS for proceeds of over $36 million to the Company after applicable underwriting discounts and commissions, and before expenses.
On March 13, 2023, Xiao-I filed a prospectus on Form 424B4 with the SEC in connection with the IPO, which incorporated and formed part of the Registration Statement (the "Prospectus" and, together with the Registration Statement, the "Offering Documents").
In conjunction with the IPO, Xiao-I ADSs began publicly trading on the Nasdaq Stock Market ("NASDAQ"). Accordingly, Xiao-I is subject to the NASDAQ's listing requirements, including, inter alia, that its ADSs maintain a minimum closing bid price of $1.00 per share (the "Minimum Bid Price Requirement"), as well as the U.S.'s Generally Accepted Accounting Principles ("GAAP"), which are a set of accounting rules, standards, and procedures that public companies trading in the U.S. must follow when preparing their financial statements.
The Complaint alleges that the Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, the Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and prospects. Specifically, the Complaint alleges that the Offering Documents and Defendants made false and/or misleading statements and/or failed to disclose that: (i) 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; (ii) Xiao-I failed to comply with GAAP in preparing its financial statements; (iii) Defendants 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; (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; and (viii) as a result, the Offering Documents and Defendants' public statements throughout the Class Period were materially false and/or misleading and failed to state information required to be stated therein.
On July 27, 2023, the SEC issued a letter to Xiao-I to address, inter alia, the Company's failure to comply with GAAP in preparing its financial statements in its 2022 annual report, as well as the need for more explicit disclosures in the report's risk factors section concerning certain of the Company's Chinese shareholders' non-compliance with Circular 37 Registration, particularly with respect to the Company's inability to use Offering proceeds for intended business purposes.
On September 25, 2023, Xiao-I issued a press release announcing its unaudited, unreviewed financial results for the first half of 2023, including, inter alia, a net loss of $18.8 million for the first half of 2023, compared to a net income of $0.6 million for the same period of 2022. In discussing these results, Xiao-I revealed that its "[t]otal operating expenses were US$34.1 million in the first half of 2023, representing an increase of 355% year over year from US$7.5 million for the same period of 2022", noting that although "selling, general and administrative expenses demonstrated improved efficiency with larger business scales, they couldn't offset the increase in [R&D] expenses, which grew by 708% year over year" (emphases added).
On this news, Xiao-I's ADS price fell $0.30 per ADS, or 14.22%, to close at $1.81 per ADS on September 25, 2023.
On October 20, 2023, Xiao-I issued a press release announcing its unaudited, reviewed financial results for the first half of 2023. Therein, the Company reiterated that it had suffered a net loss of $18.8 million and total operating expenses of $34.1 million for the first half of 2023, again citing Xiao-I's inability to "offset the increase in [R&D] expenses, which grew by 708% year over year," while further revealing that the increase in R&D "was primarily driven by the significantly [sic] increase of professional service fee[s], including the purchase of supercomputing service fees, data services, intelligent computing technology services and software outsourcing, etc. mainly from four third parties for the requirement of [a] big data model development project and other cloud platform products." The Company further explained that, "[i]n November 2022, OpenAI launched the ChatGPT, which opened up a new situation of [AI]" and that, "[u]nder such background, the Company increased investment in AI+ Industrial Internet research and development, including the research and procurement of intelligent collaborative platform, digital twin platform, data intelligence platform, industrial enterprise services and research and judgment platform and other platform products."
On this news, Xiao-I's ADS price fell $0.03 per ADS, or 1.79%, to close at $1.65 per ADS on October 20, 2023.
On April 30, 2024, Xiao-I issued a press release announcing its unaudited full year ("FY") 2023 financial results, including, inter alia, FY 2023 revenues of $59.2 million, missing consensus estimates by $30.08 million, as well as a net loss of $27 million for FY 2023, compared to a net loss of $6 million for FY 2022. In discussing these results, the Company revealed that its "[t]otal operating expenses were US$61.3 million in 2023, representing an increase of 80.7% year over year from US$33.9 million for the same period of 2022", again noting that although "the selling, general, and administrative expenses demonstrated improved efficiency with larger business scales, they couldn't offset the increase in [R&D] expenses, which grew by 118.3% year over year" (emphases added).
On this news, Xiao-I's ADS price fell $0.08 per ADS, or 6.15%, to close at $1.22 per ADS on April 30, 2024.
Then, on July 15, 2024, Xiao-I issued a press release announcing "that 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 as set forth in Nasdaq Listing Rule 5450(a)(1) as the Company's closing bid price per [ADS] . . . has been below $1.00 for a period of 30 consecutive business days."
On this news, Xiao-I's ADS price fell 2.28% to close at approximately $0.67 per ADS on July 15, 2024.
As of the time this Complaint was filed, the price of Xiao-I ADSs continues to trade below the $6.80 per share Offering price, damaging investors.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
Attorney advertising. Prior results do not guarantee similar outcomes.
CONTACT:
Danielle Peyton
Pomerantz LLP
[email protected]
646-581-9980 ext. 7980
SOURCE Pomerantz LLP
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