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Xiao-I Corp

Xiao-I CorpAIXI财报

Nasdaq · 信息技术 · 服务-预包装软件

Xiao-i is a Chinese cognitive artificial intelligence enterprise founded in 2001.

What changed in Xiao-I Corp's 20-F — 2023 vs 2024

Top changes in Xiao-I Corp's 2024 20-F

546 paragraphs added · 641 removed · 214 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

148 edited+76 added−42 removed572 unchanged
The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
As a result, these shareholders may be subject to penalties themselves, and WFOE may be unable to open a new capital account with relevant banks within China according to their internal control policies and may be restricted from remitting funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance.
As a result, these shareholders may be subject to penalties themselves, and WFOE may be unable to open a new capital account with relevant banks within China according to their internal control policies and may be restricted from remitting funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance.
Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, investors may be deprived of the benefits of such inspection.
Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, investors may be deprived of the benefits of such inspection.
Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange.
Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange.
However, Xiao-I cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness of its auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements.
However, Xiao-I cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness of its auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements.
Furthermore, there is a risk that Xiao-I’s auditor cannot be inspected by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that the PCAOB may re-evaluate its determination as a result of any obstruction with the implementation of the Statement of Protocol.
Furthermore, there is a risk that Xiao-I’s auditor cannot be inspected by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that the PCAOB may re-evaluate its determination as a result of any obstruction with the implementation of the Statement of Protocol.
These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor. ● It may be difficult for overseas regulators to conduct investigation or collect evidence within China. ● The approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws. ● If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of Xiao-I’s ADSs to significantly decline or become worthless. ● The custodians or authorized users of our controlling non-tangible assets, including seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets. ● Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment. ● There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. 5 ● We face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor. ● It may be difficult for overseas regulators to conduct investigation or collect evidence within China. ● The approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws. ● If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of Xiao-I’s ADSs to significantly decline or become worthless. ● The custodians or authorized users of our controlling non-tangible assets, including seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets. ● Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment. ● There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. ● We face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage may be harmed. ● Security breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations. ● We partially rely on third-party service providers to conduct our business and any interruption or delay in such third parties or our own failure may impair our customers’ experience. ● Our products and solutions rely on the stable performance of servers, and any disruption to our servers due to internal and external factors could diminish demand for our products and solutions, harm our business, our reputation and results of operations and subject us to liability. ● Our and our business partners’ business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak. ● If the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial condition may be adversely affected. ● We may fail to conduct our sales and marketing activities in a cost-effective manner and we are subject to limitations in promoting our products and solutions. ● If we fail to provide high quality customer services, our brand, business, and results of operations may be harmed. ● We had a concentration of major customers during the years ended December 31, 2021, 2022 and 2023 and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue within a reasonable time or at all. ● The intensifying competition, change in sector trend and landscape and government policies may have a direct impact on the industries where our clients operate their businesses, and negatively affect the stability of our clients, which may subsequently have negative impact on our business. 2 ● Our reliance on a limited number of suppliers for certain essential services could adversely affect our ability to manage our business effectively and subsequently harm our business. ● We may fail to obtain or maintain all required licenses, permits and approvals to operate our business. ● We may fail to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from any unauthorized use of our technologies. ● We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of business. ● We and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings. ● Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and solutions and have a negative impact on our business. ● We are dependent on the continuous services of our senior management and other key employees.
If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage may be harmed. ● Security breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations. ● We partially rely on third-party service providers to conduct our business and any interruption or delay in such third parties or our own failure may impair our customers’ experience. ● Our products and solutions rely on the stable performance of servers, and any disruption to our servers due to internal and external factors could diminish demand for our products and solutions, harm our business, our reputation and results of operations and subject us to liability. ● Our and our business partners’ business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak. ● If the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial condition may be adversely affected. ● We may fail to conduct our sales and marketing activities in a cost-effective manner and we are subject to limitations in promoting our products and solutions. ● If we fail to provide high quality customer services, our brand, business, and results of operations may be harmed. ● We had a concentration of major customers during the years ended December 31, 2022, 2023 and 2024 and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue within a reasonable time or at all. ● The intensifying competition, change in sector trend and landscape and government policies may have a direct impact on the industries where our clients operate their businesses, and negatively affect the stability of our clients, which may subsequently have negative impact on our business. 2 ● Our reliance on a limited number of suppliers for certain essential services could adversely affect our ability to manage our business effectively and subsequently harm our business. ● We may fail to obtain or maintain all required licenses, permits and approvals to operate our business. ● We may fail to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from any unauthorized use of our technologies. ● We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of business. ● We and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings. ● Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and solutions and have a negative impact on our business. ● We are dependent on the continuous services of our senior management and other key employees.
We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer and exchange of shares in our company by non-resident investors. ● China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. ● PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law. ● Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. ● PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities. ● Fluctuation in the value of the RMB may have a material adverse effect on the value of your investment. ● If additional remedial measures are imposed on major PRC-based accounting firms, including our independent registered public accounting firm, our financial statements could be determined not to be in compliance with the SEC requirements. ● We face uncertainties with respect to the enactment, interpretation and implementation of draft Anti-Monopoly Guidelines for the Internet Platform Economy Sector.
We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer and exchange of shares in our Company by non-resident investors. ● China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. ● PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law. ● Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. ● PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities. 5 ● Fluctuation in the value of the RMB may have a material adverse effect on the value of your investment. ● If additional remedial measures are imposed on major PRC-based accounting firms, including our independent registered public accounting firm, our financial statements could be determined not to be in compliance with the SEC requirements. ● We face uncertainties with respect to the enactment, interpretation and implementation of Anti-Monopoly Guidelines for the Internet Platform Economy Sector.
Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. See “Item 3. Key Information—D. Risk Factors —Risks Related to Our Corporate Structure— Some of our shareholders are not in compliance with the PRC’s regulations relating to offshore investment activities by PRC residents.
Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. See “Item 3. Key Information—D. Risk Factors —Risks Relating to Our Corporate Structure— Some of our shareholders are not in compliance with the PRC’s regulations relating to offshore investment activities by PRC residents.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during any three-year period. 10 Implications of Being a Foreign Private Issuer We report under the Exchange Act as a non-U.S. company with foreign private issuer status.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during any three-year period. 8 Implications of Being a Foreign Private Issuer We report under the Exchange Act as a non-U.S. company with foreign private issuer status.
Dollars for the purpose of paying dividends to the holders of our ADSs or for other business purposes, appreciation of the U.S. Dollar against the RMB would have an adverse effect on the U.S. Dollar amount available to us. Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations.
Dollars for the purpose of paying dividends to the holders of our ADSs or for other business purposes, appreciation of the U.S. Dollar against the RMB would have an adverse effect on the U.S. Dollar amount available to us. 38 Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our net revenue, earnings and cash flows; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings and expansions by us or our competitors; 48 ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our shareholders, affiliates, directors, officers or employees, our business model, our services or our industry; ● announcements of new regulations, rules or policies relevant for our business; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our net revenue, earnings and cash flows; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings and expansions by us or our competitors; 41 ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our shareholders, affiliates, directors, officers or employees, our business model, our services or our industry; ● announcements of new regulations, rules or policies relevant for our business; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
Under the deposit agreement for the ADSs, if you do not vote, the depositary will deem that you have instructed the depositary to give us a discretionary proxy to vote the Ordinary Shares underlying your ADSs at shareholders’ meetings unless we have timely provided the depositary with notice of meeting and related voting materials and ● we have instructed the depositary that we do not wish a discretionary proxy to be given; ● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; ● a matter to be voted on at the meeting would have a material adverse impact on shareholders; or ● the voting at the meeting is to be conducted via a show of hands unless voting by poll is required by the applicable listing rules or our articles of association. 50 The effect of this discretionary proxy is that you cannot prevent our Ordinary Shares underlying your ADSs from being voted, except under the circumstances described above.
Under the deposit agreement for the ADSs, if you do not vote, the depositary will deem that you have instructed the depositary to give us a discretionary proxy to vote the Ordinary Shares underlying your ADSs at shareholders’ meetings unless we have timely provided the depositary with notice of meeting and related voting materials and ● we have instructed the depositary that we do not wish a discretionary proxy to be given; ● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; ● a matter to be voted on at the meeting would have a material adverse impact on shareholders; or ● the voting at the meeting is to be conducted via a show of hands unless voting by poll is required by the applicable listing rules or our articles of association. 43 The effect of this discretionary proxy is that you cannot prevent our Ordinary Shares underlying your ADSs from being voted, except under the circumstances described above.
While detailed interpretation of or implementation rules under these regulations have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. 36 If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of Xiao-I’s ADSs to significantly decline or become worthless.
While detailed interpretation of or implementation rules under these regulations have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. 32 If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of Xiao-I’s ADSs to significantly decline or become worthless.
SAT Bulletin 45 specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise. 39 Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “ de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
SAT Bulletin 45 specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise. 34 Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “ de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
As of the date of this report, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021.
As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021.
Risk Factors —Risks Related to Doing Business in China—PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.” Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Risk Factors —Risks Relating to Doing Business in China—PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.” Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. 29 In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.
Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. 26 In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.
Failure of the VIE’s PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise materially adversely affect our business. 43 PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.
Failure of the VIE’s PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise materially adversely affect our business. 37 PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.
As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of the United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States could be enforceable in Hong Kong. 56 The ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors and executive officers named in this annual report (except H.
As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of the United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States could be enforceable in Hong Kong. 48 The ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors and executive officers named in this annual report (except H.
Moreover, our future capital needs may require us to sell additional equity or debt securities that may dilute our shareholders’ shareholdings or subject us to covenants that may restrict our operations or our ability to pay dividends. ● We have not independently verified the accuracy or completeness of data, estimates, and projections in this annual report that we obtained from third-party sources, and such information involves assumptions and liabilities. ● We have identified one material weakness in our internal control over financial reporting as of December 31, 2023.
Moreover, our future capital needs may require us to sell additional equity or debt securities that may dilute our shareholders’ shareholdings or subject us to covenants that may restrict our operations or our ability to pay dividends. ● We have not independently verified the accuracy or completeness of data, estimates, and projections in this annual report that we obtained from third-party sources, and such information involves assumptions and liabilities. ● We have identified one material weakness in our internal control over financial reporting as of December 31, 2024.
We cannot assure you, however, that our selling and marketing expenses will lead to increasing revenue, and even if they did, such increases in revenue might not be sufficient to offset the expenses incurred. 15 Security breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations.
We cannot assure you, however, that our selling and marketing expenses will lead to increasing revenue, and even if they did, such increases in revenue might not be sufficient to offset the expenses incurred. 12 Security breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations.
Therefore, you may not be able to effectively enjoy the protection offered by the U.S. laws and regulations that are intended to protect public investors. 57 As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.
Therefore, you may not be able to effectively enjoy the protection offered by the U.S. laws and regulations that are intended to protect public investors. 49 As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.
These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor.” 9 Permissions, Approvals, Licenses and Permits Required from the PRC Government Authorities for Our Operations and for Offering of Our Securities to Foreign Investors The PRC operating entities’ operations in China are governed by PRC laws and regulations.
These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor.” 7 Permissions, Approvals, Licenses and Permits Required from the PRC Government Authorities for Our Operations and for Offering of Our Securities to Foreign Investors The PRC operating entities’ operations in China are governed by PRC laws and regulations.
In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 51 Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 44 Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to make such loans to our consolidated affiliated entities, which are PRC domestic company.
Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to make such loans to our consolidated affiliated entities, which are PRC domestic companies.
However, should there be any changes to PRC laws and regulations or internal control policies of Bank of Ningbo in the future, WFOE then may be restricted from transferring funds from overseas to its capital account with Bank of Ningbo as a result. 31 Risks Relating to Doing Business in China In the following discussion of risks relating to doing business in China “we,” “us,” or “our” refer to the PRC operating entities.
However, should there be any changes to PRC laws and regulations or internal control policies of Bank of Ningbo in the future, WFOE then may be restricted from transferring funds from overseas to its capital account with Bank of Ningbo as a result. 28 Risks Relating to Doing Business in China In the following discussion of risks relating to doing business in China “we,” “us,” or “our” refer to the PRC operating entities.
If there is any change in political arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally. 47 You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Xiao-I or its management named in the annual report based on Hong Kong laws.
If there is any change in political arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally. 40 You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Xiao-I or its management named in the annual report based on Hong Kong laws.
Our ability to continue to attract and retain customers and increase sales depends largely on our ability to continue improving and enhancing the functions, performance, reliability, design, security, and scalability of our platforms. 12 We may experience difficulties in developing new technologies as it is costly and time consuming, which in turn could delay or prevent the development, introduction or implementation of new products and solutions.
Our ability to continue to attract and retain customers and increase sales depends largely on our ability to continue improving and enhancing the functions, performance, reliability, design, security, and scalability of our platforms. 10 We may experience difficulties in developing new technologies as it is costly and time consuming, which in turn could delay or prevent the development, introduction or implementation of new products and solutions.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 24 We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our business operations.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 21 We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our business operations.
The Foreign Investment Law and Implementation Regulations embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. 30 However, since these rules are relatively new, uncertainties still exist in relation to their interpretation.
The Foreign Investment Law and Implementation Regulations embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. 27 However, since these rules are relatively new, uncertainties still exist in relation to their interpretation.
New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business. 32 Since late 1970s, the PRC government has been developing a comprehensive system of laws and regulations governing economic matters in general.
New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business. 29 Since late 1970s, the PRC government has been developing a comprehensive system of laws and regulations governing economic matters in general.
According to this judicial interpretation, courts in China shall not, among other things, support contracted parties to claim foreign investment contracts in sectors not on the Special Administrative Measures for Access to Foreign Investment (Negative List) (2021) (the “Negative List (2021)”), as void because the contracts have not been approved or registered by administrative authorities.
According to this judicial interpretation, courts in China shall not, among other things, support contracted parties to claim foreign investment contracts in sectors not on the Special Administrative Measures for Access to Foreign Investment (Negative List) (2024) (the “Negative List (2024)”), as void because the contracts have not been approved or registered by administrative authorities.
In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator. 33 Advertisements shown on our platform may subject us to penalties and other administrative actions.
In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator. 30 Advertisements shown on our platform may subject us to penalties and other administrative actions.
As of the date of this annual report, we had not identified or pursued any acquisition or investment targets. If we fail to achieve our expected returns on such acquisitions or investments in the future, our business, financial conditions, results of operations and prospects may be materially and adversely affected.
As of the date of this annual report, we have not identified or pursued any acquisition or investment targets. If we fail to achieve our expected returns on such acquisitions or investments in the future, our business, financial conditions, results of operations and prospects may be materially and adversely affected.
No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder. 52 The deposit agreement may be amended or terminated without your consent.
No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder. 45 The deposit agreement may be amended or terminated without your consent.
Any resulting liabilities or expenses or any changes to our products or solutions that we have to make to limit future liabilities may have a material adverse effect on our business, results of operations, and prospects. 20 We and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings.
Any resulting liabilities or expenses or any changes to our products or solutions that we have to make to limit future liabilities may have a material adverse effect on our business, results of operations, and prospects. 17 We and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings.
The fixed component of their compensation is set on market terms and adjusted annually. The variable component consists of cash bonuses and awards of shares (or the cash equivalent). Cash bonuses are paid to executive officers and members of management based on previously agreed targets for the business. Shares (or the cash equivalent) are awarded under share options.
The fixed component of their compensation is set on market terms and adjusted annually. The variable component consists of cash bonuses and awards of shares (or the cash equivalent). Cash bonuses are paid to executive officers and members of management based on previously agreed targets for the business. Shares (or the cash equivalent) are awarded under share options. Item 4.
We had a concentration of major customers during the years ended December 31, 2021, 2022 and 2023 and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue within a reasonable time or at all.
We had a concentration of major customers during the years ended December 31, 2022, 2023 and 2024 and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue within a reasonable time or at all.
As a result, our ADSs may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the assets of the VIE that conducts all or substantially our operations. 28 The contractual arrangements with the VIE are governed by PRC law.
As a result, our ADSs may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the assets of the VIE that conducts all or substantially our operations. 25 The contractual arrangements with the VIE are governed by PRC law.
If we rely on these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. 11 RISK FACTORS An investment in Xiao-I’s ADSs involves significant risks.
If we rely on these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. 9 RISK FACTORS An investment in Xiao-I’s ADSs involves significant risks.
Such failures could subject us to claims and proceedings, which could be costly and time-consuming. Our business, financial condition and results of operations could be adversely affected. 21 We are dependent on the continuous services of our senior management and other key employees.
Such failures could subject us to claims and proceedings, which could be costly and time-consuming. Our business, financial condition and results of operations could be adversely affected. 18 We are dependent on the continuous services of our senior management and other key employees.
If the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial condition may be adversely affected. Our business has relied on the adoption of our products and solutions by a broad array of customers.
If the adoption of our products and solutions by our customers is slower than we expected, our business, results of operations and financial condition may be adversely affected. Our business has relied on the adoption of our products and solutions by a broad array of customers.
GAAP. 27 The contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control. We have to rely on the contractual arrangements with the VIE and its shareholders to operate our business in China.
GAAP. 24 The contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control. We have to rely on the contractual arrangements with the VIE and its shareholders to operate our business in China.
In addition, as of 2023, seven of our shareholders did not register according to the registration procedures stipulated in Circular 37 Registration of the SAFE when they conducted their other external investment activities unrelated to us.
In addition, as of 2024, seven of our shareholders did not register according to the registration procedures stipulated in Circular 37 Registration of the SAFE when they conducted their other external investment activities unrelated to us.
The internet content service, internet audio-visual program services and online culture activities that we conduct through the VIE, is subject to foreign investment restrictions set forth in the Negative List (2021).
The internet content service, internet audio-visual program services and online culture activities that we conduct through the VIE, is subject to foreign investment restrictions set forth in the Negative List (2024).
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq.
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a semi-annually basis as press releases, distributed pursuant to the rules and regulations of Nasdaq.
Risks Relating to Our Business and Industry ● We have had net losses (except for 2021) and negative cash flows from operating activities in the past, and we may not achieve or sustain profitability. ● If we fail to maintain and grow our customer base, keep our customers engaged through our products and solutions, our business growth may not be sustainable. ● If we fail to maintain and enhance the functions, performance, reliability, design, security, and scalability of our platforms to meet our customers’ evolving needs, we may lose our customers. ● If our products and solutions do not achieve sufficient market acceptance, our business and competitive position will suffer. ● If our expansion into new industries is not successful, our business, prospects and growth momentum may be materially and adversely affected. 1 ● The market in which we participate is competitive, and if we do not compete effectively, our business, operating results and financial condition could be harmed. ● If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our business may be materially and adversely affected. ● To support our business growth, we continue to invest heavily in our research and development efforts, the expenses of which may negatively impact our cash flow, and may not generate the results we expect to achieve. ● If our platforms experience material errors, defects or security issues, we may lose our customers, fail to honor our obligations in respect of our contract liabilities, and incur significant remedial costs. ● Our brand is integral to our success.
Treasury rules on investment in Chinese AI and technology sectors may adversely impact our financial condition and results of our operations. ● We have had net losses (except for 2021) and negative cash flows from operating activities in the past, and we may not achieve or sustain profitability. ● If we fail to maintain and grow our customer base, keep our customers engaged through our products and solutions, our business growth may not be sustainable. ● If we fail to maintain and enhance the functions, performance, reliability, design, security, and scalability of our platforms to meet our customers’ evolving needs, we may lose our customers. ● If our products and solutions do not achieve sufficient market acceptance, our business and competitive position will suffer. ● If our expansion into new industries is not successful, our business, prospects and growth momentum may be materially and adversely affected. 1 ● The market in which we participate is competitive, and if we do not compete effectively, our business, operating results and financial condition could be harmed. ● If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our business may be materially and adversely affected. ● To support our business growth, we continue to invest heavily in our research and development efforts, the expenses of which may negatively impact our cash flow, and may not generate the results we expect to achieve. ● If our platforms experience material errors, defects or security issues, we may lose our customers, fail to honor our obligations in respect of our contract liabilities, and incur significant remedial costs. ● Our brand is integral to our success.
As an ADS holder, you will only be able to exercise the voting rights carried by the underlying Ordinary Shares which are represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement.
As an ADS holder, you will only be able to exercise the voting rights carried by the underlying Ordinary Shares which are represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement, as amended (the “deposit agreement”).
These short attacks have, in the past, led to selling of shares in the market. 53 Public companies that have substantially all of their operations in China have been the subject of short selling.
These short attacks have, in the past, led to selling of shares in the market. 46 Public companies that have substantially all of their operations in China have been the subject of short selling.
We have identified one material weakness in our internal control over financial reporting as of and for the year ended December 31, 2023.
We have identified one material weakness in our internal control over financial reporting as of and for the year ended December 31, 2024.
Our former auditor, Marcum Asia CPAs LLP (“Marcum Asia”), the independent registered public accounting firm that issued the audit report for the years ended December 31, 2022 and 2021 included elsewhere in this prospectus, is a firm registered with the PCAOB and subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Our former auditor, Marcum Asia CPAs LLP (“Marcum Asia”), the independent registered public accounting firm that issued the audit report for the year ended December 31, 2022 included elsewhere in this annual report, is a firm registered with the PCAOB and subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
If we or, if required, our auditor is unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of the ADSs may decline. 23 In connection with the audit of our consolidated financial statements, as of and for the years ended December 31, 2021, 2022, we identified two material weaknesses in our internal control over the financial statement closing process.
If we or, if required, our auditor is unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of the ADSs may decline. 20 In connection with the audit of our consolidated financial statements, as of and for the year ended December 31, 2022, we identified two material weaknesses in our internal control over the financial statement closing process.
Due to the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet data center services and hardware. Our purchase from top-three suppliers in aggregate accounted for 79.2%, 66.8% and 73.2% of total purchase for the years ended December 31, 2021, 2022 and 2023, respectively.
Due to the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet data center services and hardware. Our purchase from top-three suppliers in aggregate accounted for 66.8%, 73.2% and 39.6 % of total purchase for the years ended December 31, 2022, 2023 and 2024, respectively.
Yuan”). Mr. Yuan is the CEO and Chairman of the Company and a recognized A1 industry key opinion leader and domain expert. As a result of the Issuance, Mr. Yuan beneficially owns more than 79% of the voting power of Xiao-I.
Yuan”). Mr. Yuan is the CEO and Chairman of the Company and a recognized A1 industry key opinion leader and domain expert. As a result of the Issuance, Mr. Yuan beneficially owns more than 79% of the voting power of Xiao-I. As of the date of this annual report, Mr.
GAAP and SEC reporting requirem ents and (ii) our lack of internal file management procedures and effective recognition procedures to recognize revenue and costs timely.
GAAP and SEC reporting requirements and (ii) our lack of internal file management procedures and effective recognition procedures to recognize revenue and costs timely.
Our R&D expenses incurred were US$5.36 million, US$24.00 million and US$52.39 million, respectively, for the years ended December 31, 2021, 2022 and 2023, accounting for 32.2%, 70.7% and 85.4% of our operating expenses for each of the corresponding periods. The industry in which we operate is subject to rapid technological changes and is evolving quickly in terms of technological innovation.
Our R&D expenses incurred were US$24.00 million, US$52.39 million, and US$34.66 million, respectively, for the years ended December 31, 2022, 2023 and 2024, accounting for 70.7%, 85.4% and 56.9% of our operating expenses for each of the corresponding periods. The industry in which we operate is subject to rapid technological changes and is evolving quickly in terms of technological innovation.
If there is significant change to current political arrangements between mainland China and Hong Kong, the PRC government may intervene or influence our Hong Kong operations, which could result in a material change in our operations in Hong Kong. ● You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Xiao-I or its management named in the annual report based on Hong Kong laws. 6 Risks Relating to the ADSs ● Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment. ● A large, active trading market for the ADSs may not develop and you may not be able to resell your ADSs at or above the public offering price. ● The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. ● The sale or availability for sale of substantial amounts of ADSs could adversely affect their market price. ● Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights. ● Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the Ordinary Shares underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests. ● You may not receive distributions on the ADSs or any value for them if such distribution is illegal or impractical or if any required government approval cannot be obtained in order to make such distribution available to you. ● Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings. ● You may be subject to limitations on transfers of your ADSs. ● Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement. ● ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action. ● The deposit agreement may be amended or terminated without your consent. ● Holders or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement. ● Techniques employed by short sellers may drive down the market price of the ADSs. ● If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for the ADSs and trading volume could decline. ● Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs. 7 ● Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S.
Risks Relating to the ADSs ● Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment. ● A large, active trading market for the ADSs may not develop and you may not be able to resell your ADSs at or above the public offering price. ● The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. ● The sale or availability for sale of substantial amounts of ADSs could adversely affect their market price. ● Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights. ● Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the Ordinary Shares underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests. ● You may not receive distributions on the ADSs or any value for them if such distribution is illegal or impractical or if any required government approval cannot be obtained in order to make such distribution available to you. ● Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings. ● You may be subject to limitations on transfers of your ADSs. ● Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement. ● ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action. ● The deposit agreement may be amended or terminated without your consent. ● Holders or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement. ● Techniques employed by short sellers may drive down the market price of the ADSs. ● If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for the ADSs and trading volume could decline. ● Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs. 6 ● Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S.
Therefore, you may not be able to enjoy the protection of such laws in an effective manner. ● As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards. ● Our articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including Ordinary Shares represented by the ADSs, at a premium, as a result, it could materially adversely affect the rights of holders of our ADSs. ● We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements. ● We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies. ● We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.” ● There can be no assurance we will not be a passive foreign investment company (“PFIC”), for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or Ordinary Shares. ● We are not required to disclose compensation of Directors and Officers under Cayman Islands law. 8 Holding Foreign Companies Accountable Act Pursuant to the HFCAA if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
Therefore, you may not be able to enjoy the protection of such laws in an effective manner. ● As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards. ● Our articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including Ordinary Shares represented by the ADSs, at a premium, as a result, it could materially adversely affect the rights of holders of our ADSs. ● We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements. ● We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies. ● We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.” ● There can be no assurance we will not be a passive foreign investment company (“PFIC”), for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or Ordinary Shares. ● We are not required to disclose compensation of Directors and Officers under Cayman Islands law.
Due to the uncertainties associated with the evolving legislative activities and varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some of our business practice in order to comply with these laws, regulations, rules, guidelines and implementations, and any incompliance or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our financial conditions, operations and business prospects. 46 Risks Relating to Doing Business in Hong Kong In the following discussion of risks relating to doing business in Hong Kong “we,” “us,” or “our” refer to the PRC operating entities.
Due to the uncertainties associated with the evolving legislative activities and varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some of our business practice in order to comply with these laws, regulations, rules, guidelines, and implementations, and any incompliance or associated inquiries, investigations, and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our financial conditions, operations, and business prospects.
SUMMARY OF RISK FACTORS An investment in our ADSs is subject to a number of risks, including but not limited to risks related to doing business in China, risks related to our corporate structure, risks related to our business and industry, , and risks related to ownership of our ADSs.
SUMMARY OF RISK FACTORS An investment in our ADSs is subject to a number of risks, including but not limited to risks relating to doing business in China, risks relating to doing business in Hong Kong, risks relating to our corporate structure, risks relating to our business and industry, and risks relating to the ADSs.
As a result, it may be difficult to effect service of process within the United States upon our officers and directors (except H. David Sherman).
A substantial portion of the assets of our officers and directors is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon our officers and directors (except H. David Sherman).
See “Taxation — United States Federal Income Tax Considerations — Passive Foreign Investment Considerations; Passive Foreign Investment Rules .” We are not required to disclose compensation of Directors and Officers under Cayman Islands law.
Taxation — United States Federal Income Taxation Considerations — Passive Foreign Investment Company Considerations; Passive Foreign Investment Company Rules .” 51 We are not required to disclose compensation of Directors and Officers under Cayman Islands law.
SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial public offering, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.
SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.
Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties. 44 In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our PRC subsidiary.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our PRC subsidiary.
With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act of the Cayman Islands (the “Substance Act”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards.
The Cayman Islands introduced the International Tax Co-operation (Economic Substance) Act (the “ Substance Act ”) effective from January 1, 2019, which established certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards.
We generated approximately 2.3%, 0.9% and 0.9% of our revenues from Hong Kong in fiscal year 2021, 2022 and 2023, respectively.
We generated approximately 0.9%, 0.9% and 0.6% of our revenues from Hong Kong in fiscal year 2022, 2023 and 2024, respectively.
In Hong Kong, the collection of personal data, their use and disclosure, retention and granting of access to and correction of personal data is governed by the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong). See “Regulations in Hong Kong — Personal data law in Hong Kong” for further details.
In Hong Kong, the collection of personal data, their use and disclosure, retention and granting of access to and correction of personal data is governed by the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong).
See “Regulations in Hong Kong — Competition law in Hong Kong” for further details. As of the date of this annual report, our business operations in Hong Kong, which are relatively insignificant as compared to our business as a whole, are only required to comply with the Hong Kong laws and regulations.
As of the date of this annual report, our business operations in Hong Kong, which are relatively insignificant as compared to our business as a whole, are only required to comply with the Hong Kong laws and regulations.
See “Description of American Depositary Shares” for more information. ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
For the years ended December 31, 2021, 2022 and 2023, the percentage of our revenue attributable to our largest customer amounted to 41.2%, 20.4% and 29.3%, respectively, while the percentage of our revenue attributable our five largest customers for the years ended December 31, 2021, 2022 and 2023 amounted to 67.1%, 58.4% and 69.7%, respectively.
For the years ended December 31, 2022, 2023 and 2024, the percentage of our revenue attributable to our largest customer amounted to 20.4%, 29.3% and 22.4 % , respectively, while the percentage of our revenue attributable our five largest customers for the years ended December 31, 2022, 2023 and 2024 amounted to 58.4%, 69.7% and 49.9%, respectively.
Under the Nasdaq Global Market (“Nasdaq”) listing rules, the Issuance resulted in a change in control and the Company became a “controlled company” as defined under those rules. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements.
Yuan beneficially owns more than 50% of the voting power of Xiao-I. Under the Nasdaq Global Market (“Nasdaq”) listing rules, the Issuance resulted in a change in control and the Company became a “controlled company” as defined under those rules. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements.
On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the HFCAA. Rule 6100 provides a framework for the PCAOB to use to determine whether it is unable to inspect or investigate registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
Rule 6100 provides a framework for the PCAOB to use to determine whether it is unable to inspect or investigate registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
The population in most of the major cities was locked down to a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited. People are forced to stay at home, and travel and social activities are restricted.
The population in most of the major cities was locked down to a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited.
When we lose our status as an “emerging growth company” and reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.
However, our management is still required to assess and report on the effectiveness of our internal control over financial reporting under Section 404(a). When we lose our status as an “emerging growth company” and reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.
We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from our operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the apparent authority of such employees and acts in good faith. 38 In the following discussion of risks relating to doing business in China “we,” “us,” or “our” refer to Xiao-I.
We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from our operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the apparent authority of such employees and acts in good faith.
We took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees, and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained and impacted.
People are forced to stay at home, and travel and social activities are restricted. 13 We took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees, and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained and impacted.
Such negative publicity could damage our reputation and hurt our future sales. Our brand is integral to our success. If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage may be harmed.
Such negative publicity could damage our reputation and hurt our future sales. Our brand is integral to our success. If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage may be harmed. We believe that maintaining, promoting and enhancing our Xiao-I (Chinese: 小i机器人) brand is critical to maintaining and expanding our business.
The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets. 34 On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Marketing and Sales We have built our Xiao-i (Chinese: 小i机器人) brand through a multitude sales channels, including: ● industry trade shows, ● academic seminars, ● publicity of major milestones and achievements, and ● collaboration with relevant academic, governmental and industrial parties. 78 With these approaches, we have successfully built our brand and expanded customer markets.
Sales and Marketing We have built our Xiao-i (Chinese: 小i机器人) brand through a multitude of avenues, including: ● industry trade shows; ● academic seminars; ● publicity of major milestones and achievements; and ● collaboration with relevant partners. With these approaches, we have successfully built our brand and expanded customer markets.
The following table sets forth the product lines of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % MaaS 5,532,917 17.0 % 12,924,039 26.8 % 19,193,177 32.4 % Non-MaaS 26,991,096 83.0 % 35,260,919 73.2 % 39,972,082 67.6 % Total 32,524,013 100.0 % 48,184,958 100.0 % 59,165,259 100.0 % By way of delivery, MaaS and non-MaaS product can be delivered in different ways: software delivery, embedded in hardware products, technology development services, maintenance services and cloud platform subscription.
The following table sets forth the product lines of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2022 2023 2024 USD % USD % USD % MaaS 12,924,039 26.8 % 19,193,177 32.4 % 51,324,373 73.0 % Non-MaaS 35,260,919 73.2 % 39,972,082 67.6 % 18,989,942 27.0 % Total 48,184,958 100.0 % 59,165,259 100.0 % 70,314,315 100.0 % By way of delivery, we generate revenue primarily from the (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software products, (iv) M&S service, and (v) sale of hardware products.
We believe we are well-positioned to capture the growing market opportunities due to the infrastructure we have created. Our platform products and services are marketed and sold primarily to customers in the following industries: (1) Contact Center, (2) Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing and (7) Smart Healthcare.
Our CIAI platform products and services are marketed and sold primarily to customers in the following industries: (1) Contact Center, (2) Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing and (7) Smart Healthcare. In June 2023, we launched Hua Zang LLM which is a foundational model with versatile capabilities, meticulously developed by us through independent research.
As a leading AI technology and industrialization service platform in China, through years of operation, Xiao-I has established cooperation with many leading companies amongst various industry verticals according to Frost & Sullivan.
As a leading AI technology and industrialization service platform in the world, through years of operation, Shanghai Xiao-I has established extensive cooperation with many leading companies amongst various industry verticals. As a result, we are well positioned to capture significant monetization opportunities. LLMs have demonstrated remarkable capabilities, however, standalone LLMs may face limitations in terms of domain specificity and actionability.
Intellectual Property We establish and protect our intellectual property rights through patent, copyright, trademark and trade secret laws, as well as non-competition, confidentiality and other contractual clauses, to establish and protect our intellectual property rights.
We seek to protect our intellectual property assets and brand through a combination of monitoring and enforcement of trademark, patent, copyright and trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality agreements and procedures.
The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Sale of cloud platform products 5,550,959 17.1 % 25,742,135 53.4 % 47,007,556 79.5 % Technology development service 9,246,992 28.4 % 16,419,889 34.1 % 7,839,700 13.3 % Sale of software products 14,878,256 45.8 % 3,547,113 7.4 % 1,566,455 2.6 % M&S service 2,772,795 8.5 % 2,429,526 5.0 % 2,676,185 4.5 % Sale of hardware products 75,011 0.2 % 46,295 0.1 % 75,363 0.1 % Total 32,524,013 100.0 % 48,184,958 100.0 % 59,165,259 100.0 % 71 Our Competitive Advantages We believe we have the following competitive advantages and they distinguish us from our competitors: Our Pioneer Position in AI Technology and Focus on R&D ● We believe that we pioneered the industry’s first cognitive intelligence and narrow artificial intelligence technology and have built on our culture of innovation. ● Since its establishment in 2001, Xiao-i has focused on developing cognitive intelligence technologies based on its natural language processing and “AI” implementation in businesses, enjoying a privileged reputation in the “AI” industry.
The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2022 2023 2024 USD % USD % USD % Sale of cloud platform products 25,742,135 53.4 % 47,007,556 79.5 % 40,877,256 58.1 % Technology development service 16,419,889 34.1 % 7,839,700 13.3 % 24,105,644 34.3 % Sale of software products 3,547,113 7.4 % 1,566,455 2.6 % 1,516,169 2.2 % M&S service 2,429,526 5.0 % 2,676,185 4.5 % 2,419,901 3.4 % Sale of hardware products 46,295 0.1 % 75,363 0.1 % 1,395,345 2.0 % Total 48,184,958 100.0 % 59,165,259 100.0 % 70,314,315 100.0 % Cost of revenues Our cost of revenues primarily consists of the following components: (i) staff costs (salaries and employee benefits), (ii) cost of materials, which primarily includes software and hardware purchased, (iii) cloud hosting service fees, and (iv) overhead costs relating to consumables and office expenses used for production.
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Item 4. Information on the Company. A. History and Development of the Company. In the following discussion of corporate history, “we,” “us,” or “our” refer to Xiao-I. Xiao-I Corporation We were incorporated in the Cayman Islands on August 13, 2018, with limited liability under the Companies Act.
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Item 4.A — “Information on the Company — History and Development of the Company — Recent Developments .” Business Highlights As a pioneer in cognitive intelligence and a global leader in AI technology commercialization, we continue to redefine industry standards through innovation-driven solutions.
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Upon incorporation, the authorized share capital of our company was US$50,000 divided into 1,000,000,000 shares, par value of US$0.00005 each, comprising of 1,000,000,000 Ordinary Shares of a par value of US$0.00005 each.
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Rooted in natural language processing and proprietary cognitive frameworks, our mission remains steadfast: to empower businesses and individuals with scalable, ethical, and transformative AI applications. With over two decades of technological excellence, we are uniquely positioned to bridge cutting-edge research with real-world value creation.
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On August 30, 2018, we established our wholly owned subsidiary AI Plus Holding Limited (“AI Plus”), under the law of British Virgin Islands, as our intermediate holding company, which then established its wholly owned subsidiary, Xiao-i Technology Limited (“Xiao-i Technology”) under the law of Hong Kong, which in turn established a wholly owned PRC subsidiary, Zhizhen Artificial Technology (Shanghai) Company Limited (“Zhizhen Technology”) or the WFOE, on March 29, 2019.
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In 2024, with strong incremental revenue and profitability, our net losses narrowing sharply to US$14.55 million —a remarkable turnaround from the US$27.01 million net loss reported in 2023. Our Model-as-a-Service (MaaS) business achieved a landmark performance, surging 167.4% YoY to US$51.32 million, up from US$19.19 million in 2023.
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Subsequently, we, through our WFOE, entered into a series of contractual arrangements with Shanghai Xiao-i and its shareholders whereby we were established as the primary beneficiary of Shanghai Xiao-i for accounting purposes. We have recognized the net assets of Shanghai Xiao-i at historical cost with no change in basis in the consolidated financial statements upon the completion of this reorganization.
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The exponential growth in MaaS was primarily driven by the Hua Zang LLM, which alone contributed US$28.99 million—a 257.9% YoY increase—underscoring its dominance in enterprise applications such as financial analytics, customer services, and smart manufacturing. This milestone was accompanied by significant economies of scale, with the MaaS business delivering growth in both revenue and profitability.
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On May 18, 2023, AI Plus established its wholly owned US subsidiary, Xiao-I Plus Inc.
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The business achieved a gross margin of 81.0% in 2024, an increase of 15 percentage points from 65.9% in 2023, reflecting the benefits of operational leverage and cost optimization. Simultaneously, our Technology Development Services revenue skyrocketed 207.5% YoY to US$24.11 million (from US$7.84 million in 2023), reflecting heightened demand for customized AI solutions.
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On March 1, 2024, AI Plus established its wholly owned United Arab Emirates subsidiary, Xiao-I Super Ltd. 61 As of the date of this annual report, Al Plus, Xiao-i Technology, Zhizhen Technology, Xiao-I Plus Inc. and Xiao-I Super Ltd. do not have any substantive business operations.
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Clients increasingly sought tailored model architecture, industry-specific fine-tuning, and hybrid deployment frameworks, validating our strategy to prioritize agility and vertical specialization over generic scalability. The second half of 2024 marked a pivotal expansion into consumer markets with the overseas launch of our AI-powered smart glasses.
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As a result of our indirect ownership in Zhizhen Technology and the variable interest entity contractual arrangements, we are regarded as the primary beneficiary of the VIE for accounting purposes. We treat the PRC operating entities as our consolidated affiliated entities under U.S.
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This product catalyzed an 18-fold surge in hardware revenue to US$1.40 million (from US$75,363 in 2023), capturing demand for wearable AI in North America and Europe.
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GAAP, and have consolidated the financial results of these entities in our consolidated financial statements in accordance with U.S. GAAP.
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Complementing this success, we unveiled tAIkbox—a groundbreaking AI-powered customer service solution integrating hardware and software—designed specifically for global markets. tAIkbox leverages Hua Zang LLM’s capabilities, agentic workflows and edge-computing efficiency to deliver seamless, context-aware interactions. Early adoption rates and partner feedback suggest strong revenue potential in 2025 and beyond.
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On December 13, 2023, we issued 3,700,000 preferred shares, each with a par value of US$0.00005 and carrying a voting right equivalent to 20 votes (the “3.7 million Preferred Shares” or the “Preferred Shares”) to ZunTian Holding Limited (“ZunTian”), an existing shareholder of Xiao-I (the “Issuance”). ZunTian is a BVI-incorporated company wholly owned and controlled by Mr. Hui Yuan (“Mr.
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In terms of operation efficiency, in 2024, R&D investment decreased 33.8% YoY to US$34.66 million (from US$52.39 million in 2023), primarily due to the completion of Hua Zang LLM’s pre-training phase in 2023. Current efforts focus on task-specific fine-tuning, lightweight deployment, and commercialization-ready optimizations.
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Yuan”). Mr. Yuan is the CEO and Chairman of the Company and a recognized A1 industry key opinion leader and domain expert. As a result of the Issuance, Mr. Yuan beneficially owns more than 79% of the voting power of Xiao-I.
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Moving forward, R&D spending will align closely with productization roadmaps, maintaining a downward trend as a percentage of revenue. General and Administrative Expenses (G&A) as a percentage of net revenue increased 25.2% year-over-year to US$22.94 million in 2024, primarily driven by one-time charges including bad debt provisions, workforce restructuring costs, and share-based financing expenses.
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Under the Nasdaq listing rules, the Issuance resulted in a change in control and the Company became a “controlled company” as defined under those rules. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements.
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We anticipate bringing G&A-to-revenue ratio below 15% in 2025 through sustainable cost controls, as these non-recurring expenditures will be absorbed within the current fiscal cycle. The workforce optimization charge specifically reflects our AI-driven organizational transformation.
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If we rely on these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. B. Business Overview. In the following discussion of business, “we,” “us,” or “our” refer to Shanghai Xiao-i and its subsidiaries. Overview Xiao-I is a holding company incorporated in Cayman Islands.
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By deploying AI Co-pilot systems across development workflows, we have significantly reduced dependency on junior engineers while expanding strategic roles in senior architecture design, prompt engineering, and AI model training. This leaner, AI-augmented team structure is projected to deliver operational efficiency gains through 2025.
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As a holding company with no material operation of its own, it conducts substantially all our operations in China through a variable interest entity, or the VIE, Shanghai Xiao-i Robot Technology Co., Ltd., (“Shanghai Xiao-i”) and its subsidiaries. Shanghai Yingsi Software Technology Co., Ltd. (“Incesoft”) was founded in 2001.
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As AI transitions from experimentation to industrialization, we remain committed to delivering tangible ROI through verticalized solutions, ethical AI governance, and global market agility.
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Incesoft established the Xiaoi robot brand (Chinese: 小i机器人) and developed AI technology used to support its consumer-to-consumer business model. In 2009, Incesoft transformed its business model from consumer-to-consumer to business-to-business. At the same time, founders of Incesoft founded Shanghai Xiao-i, the VIE, which acquired the Xiaoi robot brand and Incesoft’s core AI technology.
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With Hua Zang LLM as our cornerstone, we are poised to lead the next wave of AI-driven transformation—for enterprises, consumers, and society at large. 2025 Outlook Global Market Expansion: Scaling AI-Driven Innovations Amidst challenging macroeconomic conditions and geopolitical uncertainties, our company maintains overseas expansion efforts as an established participant in cognitive intelligence, with core strategies focused on AI-powered hardware and the tAIkbox integrated customer service solution.
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Following the acquisition, Incesoft was dissolved by de-registering with local company registrar in accordance with PRC law in 2012.
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AI Glasses: Building on the success of our 2024 overseas launch, we target delivery of over 10,000 units in 2025, focusing on North America, where demand for wearable AI is surging.
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Since 2009, Shanghai Xiao-i has become a leading artificial intelligence (“AI”) company by building on its wide technology commercialization, brand recognition and culture of innovation in China. 62 Milestone Accomplishments over 20 Years History We are a global leading cognitive artificial intelligence company.
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These devices, equipped with real-time translation, augmented reality overlays, and context-aware analytics, are redefining human-AI collaboration on daily basis. 73 tAIkbox: Our flagship AI customer service solution, unveiled in Q1 2025, is engineered to drive operational efficiency across industries.
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Since our establishment in 2001, We have been dedicated to continuous innovation and breakthroughs in core technologies related to cognitive intelligence rooted in natural language processing. our development goal is to achieve scalable implementation and commercialization of our innovative proprietary technologies.
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Leveraging on Hua Zang LLM’s capabilities, agentic workflows and edge-computing efficiency, tAIkbox can be applied across platforms, conduct complex tasks with plug-and-play feature. For example, in the golf club management vertical, tAIkbox’s natural language interface seamlessly handles 24/7 tasks—from tee-time reservations to parking guidance and inventory upselling—reducing labor costs by 60% in pilot deployments.
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We, with over 22 years of technical accumulation and industry experiences, have become a leading force in the field of AI industrial application. The company adheres to the mission of “serve and benefit more people with our AI technology” and focuses on the continuous innovation and breakthrough of artificial intelligence technology development.
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Going forward, we will expand tAIkbox’s adaptability to more industries: healthcare triage, restaurant order management, or hotel concierge services, with a roadmap to cover 5+ verticals by 2030. Profitability Roadmap: Efficiency and Discipline 2025 marks a pivotal transition to sustainable profitability, fueled by revenue diversification and operational optimization.
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We believe that we are the pioneer of virtual chatbot technology. We launched our first chatbot in 2004. Within two years, we applied chatbot technology to the field of intelligent services and took the lead in creating industry application benchmark cases.
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Additionally, we anticipate that incremental revenue from the overseas sector will further enhance our operational efficiency. R&D Expenditure Discipline: R&D investment decreased 33.8% year-over-year to US$34.66 million in 2024 (from US$52.39 million in 2023), primarily due to the completion of Hua Zang LLM’s capital-intensive pre-training phase in 2023.
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We developed thousands of business cases, and provide our customers with a wide range of solutions from diversified products to superior customized services, formulating a scale of business applications and a mature commercialization path, establishing our leading position in the artificial intelligence industry.
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Current efforts are focused on capitalizing on existing infrastructure through task-specific fine-tuning, lightweight deployment optimizations, and commercial-ready enhancements such as industry-tailored adaptations for tAIkbox. Moving forward, R&D spending will align rigorously with near-term productization roadmaps, prioritizing monetization-ready initiatives over foundational research.
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As a representative enterprise in the field of Cognitive AI, we led the development of the world’s first international standard in affective computing, contributed to the drafting of the “China Artificial Intelligence Industry Intellectual Property White Paper” for four consecutive years(from 2010 to 2013), demonstrated its influence in global artificial intelligence industry.
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As a result, R&D intensity is projected to maintain a downward trajectory as a percentage of revenue, reflecting improved scalability of our AI asset base.
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As of the date of this annual report, Xiao-I have 334 authorized patents, along with 138 pieces of software copyrights, 256 registered trademarks, and its accumulation of intellectual property demonstrates the company’s fruitful achievements in technological innovation.
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G&A Optimization: General and Administrative Expenses (G&A) as a percentage of net revenue increased 25.2% year-over-year to US$22.94 million in 2024, primarily driven by one-time charges including bad debt provisions, workforce restructuring costs, and share-based financing expenses. The workforce optimization charge specifically reflects our AI-driven organizational transformation across both technical and administrative functions.
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We are also regarded by Gartner as the “representative of Conversational Al enterprises”, proving the company’s outstanding position and influence in the industry worldwide. 63 On June 29, 2023, we launched “Our Own ChatGPT” – Hua Zang Universal Large Language Model, which has a comprehensive coverage of hundreds of capabilities of the LLM.
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This encompasses strategic realignment of R&D teams through reduced reliance on junior developers while scaling senior technical roles such as systems architects, coupled with streamlining administrative operations via AI-powered automation of OA processes. We anticipate bringing G&A-to-revenue ratio below 15% in 2025 through sustainable cost controls, as these non-recurring expenditures will be absorbed within the current fiscal cycle.
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It possesses the core features of “Controllable, Customizable, and Deliverable”, solving the key challenges faced by global AI models. Building on the solid foundation of the Hua Zang Universal Large Language Model, we launched the revolutionary Hua Zang Ecosystem on October 26, 2023 which carries significant implications in the industry.
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By deploying AI Co-pilot systems across all workflows, we have significantly reduced dependency on junior engineers while expanding strategic roles in senior architecture design, prompt engineering, and AI model training. This leaner, AI-augmented team structure is projected to deliver operational efficiency gains through 2025.
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Based on the Hua Zang Universal Large Language Model, through Hua Zang Developer Platform, it provides service guarantees such as cultivation, marketing, and investment, connecting global ecosystem partners, customers, and developers. It constantly promotes the implementation and commercialization of the customer application scenarios and use cases by Hua Zang LLM.
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Major Factors Affecting Our Results of Operations Our business and operating results are affected by the general factors that affect the global robotics industry, particularly the accelerating fragmentation of global governance system and the dynamics of software robotics industry. Geopolitical Turbulence The accelerating fragmentation of global governance systems introduces structural uncertainties.
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Currently, dozens of co-created achievements have been successfully implemented, helping partners further commercialize in vertical fields. Hua Zang Ecosystem is now continuously collaborating with thousands of ecosystem partners, covering 50+ industry fields, involving various fields such as IoT, finance, healthcare, maternal and infant, automobile, manufacturing, operator etc.
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Heightened US-China strategic competition manifests through escalating technology decoupling (e.g., semiconductor export controls), retaliatory tariffs impacting cross-border hardware procurement and sales, and regulatory barriers targeting cloud-based AI services. These tensions significant uncertainties to our global operations.
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This validates the commercialization path of the Hua Zang Ecosystem and lays a solid foundation for further promoting the large-scale implementation of Hua Zang Universal Large Language Model in various industries. Actively expanding into the international markets is a key driver of future revenue growth for Xiao-I. We set up our APAC headquarter in Hong Kong in 2018.
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Potential risks include but not limited to: Tariff wars and trade barriers that may increase costs for cross-border product exports and operation efficiencies (e.g., AI hardware products). Supply chain disruptions caused by regional conflicts or sanctions, particularly affecting hardware procurement and international technical collaborations (e.g., AI hardware products).
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In 2023, Xiao-I is publicly traded on the Nasdaq Stock Market (NASDAQ: AIXI). In addition, we established our wholly owned subsidiaries both in the United States and the UAE to implement our global business expansion plan.
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Heightened market access restrictions, such as recent scrutiny on Chinese technology enterprises in semiconductors and AI sectors. Regulatory compliance challenges due to evolving foreign investment policies, including data security reviews and localization requirements in critical markets.
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Product and Technology Overview Overall Architecture of Xiao-i Products and Technologies 64 Prior to the introduction of Hua Zang LLM in June 2023, the overall architecture of our products and technologies is divided into three layers: (1) infrastructure, (2) aggregation empowerment platform and (3) domain application.
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Continued Monetization of Robot Products and Services Our long-term growth will depend on our continued ability to expand our customer base and increase revenue from MaaS and non-MaaS business. We have developed products and services in different industries. MaaS We currently provide CIAI model, image model and Hua Zang LLM.
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With the participation of Hua Zang LLM, we reformed the product line into Model as a service (MaaS) and non-MaaS. Infrastructure Layer Our infrastructure layer provides the informational support for our products and technologies. Typically built with third-party products and technologies, we integrate the information into the infrastructure layer.
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It integrates the latest Al algorithms, drawing upon massive data, cross-lingual and multitask training, and domain knowledge, with the traits of controllability, customizability and deploy ability. 74 Non-MaaS We currently provide AI Chatbot, Live Chat, Smart Agent Assistant, Smart Coach, Intelligent Knowledge Management, Smart lVR, Smart Outbound Call, and RPA.
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Additional properties include: ● Compatibility with cloud native and private or third-party cloud platforms; ● Ubiquitous perception layer connection enabling integration with the Internet of Things, the Internet, 5G, and dedicated networks; and ● Multidimensional data collection and integration, including spatiotemporal, channels, and community.
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According to Frost & Sullivan, Shanghai Xiao-i has been focusing on developing cognitive intelligence technologies based on its cutting-edge natural language processing and AI implementation in businesses, enjoying a privileged reputation in AI industry.
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Aggregation Empowerment Platform Layer AI Core Technology Platform — Cognitive Intelligence Artificial Intelligence (CIAI) Using proprietary intellectual property technologies, we have independently developed CIAI, our core technology platform.
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The integration of LLM and traditional AI product would have better delivery result in practice. Thus, we intend to leverage our experience of traditional AI products, integrate non-MaaS product with LLM, and deliver AI product with better experiences in the near future.
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To date, we have developed and commercialized six core technologies based on CIAI: (1) natural language processing, (2) speech processing, (3) computer vision, (4) machine learning, (5) affective computing and (6) data intelligence and hyperautomation. 65 ● Natural Language Processing ● CIAI’s multilingual, natural language processing capability extracts and analyzes information, mines text, constructs knowledge, and performs knowledge representation and reasoning based on words, phrases, sentences, and text, providing solutions to the human-computer interaction needs of diverse enterprises and professional users. ● Speech Processing ● The hybrid architecture of Time-Delay Neural Network + Deep Feedforward Sequential Memory Network + attention, in combination with our vast corpus accumulation of more than ten years, has enabled us to train our intelligent voice technology for end-to-end application across various scenarios in numerous fields.
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Our software business has experienced steady growth during the past few years. Competition Industry competition is intense, but there is significant market potential in the rapidly growing AI industry. We compete with various integrated AI services providers in MaaS industry. Our products’ main competitors include OpenAI, Cohere, Anthropic, Baidu, Google, and Microsoft.
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Based on these technologies, we have built a variety of intelligent voice solutions under the Aviation Industry Computer-Based Training Committee framework, including intelligent Interactive Voice Response navigation, intelligent outbound call, intelligent agent assistance, intelligent voice quality inspection, and intelligent coaching. ● Computer Vision ● We offer various computer vision capabilities, including face recognition and analysis, multi-target tracking, human posture and action recognition, and scene analysis capabilities such as semantic and instance segmentation.
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To further enhance our market position, we will leverage on our good customer relationships developed in the past 1000 delivery cases, practically commercialized our technologies into product. Other than B2B market, we will also explore the potential from B2C market. In addition, we will be actively seeking for oversea market development to further expand our market size.
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In terms of Optical Character Recognition (“OCR”), we have general OCR and customized OCR for all types of cards, invoice, receipts, tickets, and more. In terms of construction drawing analysis, we apply various capabilities including pattern recognition and computer vision to comprehensively analyze and process CAD drawings, bringing to life standard review capability for construction drawings.
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Technology We have a strong human-computer cognitive interaction ability, which is known as “representative of conversational AI enterprises” by Gartner. Our technical strength and academic status have also been recognized on the international platform. We are a technology-driven company and our research and development staffs are an important asset for us.
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Relating to engineering, we provide rapid engineering customization through its internally-developed deep learning framework. We also offer model distillation and pruning solutions to meet clients’ model compression requirements.
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To further strengthen our technological ability, we have set training courses and talent development plans to nurture the staffs. With aligned interests, we promote our research and development ability to respond to the rapidly changing market. Intellectual Property Our intellectual property includes trademarks related to our brands and services, copyrights in software, patents and other intellectual property rights and licenses.
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This high performance framework is adaptable to various environments. ● Machine Learning ● Machine learning methods offered by us include everything from traditional machine learning to the latest deep learning, reinforcement learning, active learning, transfer learning, and generative adversarial networks (“GAN”).
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For further details, see “Item 3.D Key Information - Risk Factors — Risks Relating to Our Business and Industry — We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of business ” of this annual report. 75 As of December 31, 2024, the Group has obtained 342 granted patents and currently holds 582 active patent applications globally.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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We adhere to the mission of “serve and benefit more people with our AI technology” and provide our clients with a whole range of AI solutions, covering industries of customer service center, finance, urban public service, architecture, healthcare, manufacturing, metaverse and more. In 2023, the breakthroughs and applications of generative AI technology have continuously reshaped our understanding and expectations.
We adhere to the mission of “serve and benefit more people with our AI technology” and provide our clients with a whole range of AI solutions, covering industries of customer service center, finance, urban public service, architecture, healthcare, manufacturing, metaverse and more.
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The iterative advancements in large language model (“LLM”), the emergence of multimodal AI and AI Agents, and the integration of AI across various industries, have marked a period of rapid evolution and transformation within the AI sector. As AI technology continues to mature and advance, its integration into our daily lives becomes increasingly seamless.
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The year 2024 has witnessed unprecedented acceleration in the evolution of large language models (LLMs), marked by breakthroughs in performance, versatility, and accessibility. Leading models such as ChatGPT-4o, Grok 3, and DeepSeek R3 have redefined industry benchmarks, demonstrating remarkable advancements in reasoning, multimodal integration, and real-time responsiveness.
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AI is poised to evolve from being a mere work assistant to a full-fledged life companion, from a content creator to a decision-support system. Gradually, AI will emerge as a pivotal force driving societal progress and fostering innovation, contributing significantly to the betterment of our world. However, LLMs are getting bigger and more expensive.
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This surge in foundational model capabilities—driven by innovations in scaling laws, hybrid architectures (e.g., MoE), and cost-efficient training methodologies—has catalyzed a competitive landscape where enterprises now prioritize speed-to-market and application-specific optimization over mere parameter count. Against this backdrop, our Hua Zang LLM has emerged as a cornerstone of innovation.
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According to the “2023 AI Index Report” by Standford University Human-Center Artificial Intelligence, GPT-2, released in 2019, considered by many to be the first large language model, had 1.5 billion parameters and cost an estimated $50,000 USD to train. 82 PaLM, one of the flagship large language models launched in 2022, had 540 billion parameters and cost an estimated $8 million USD—PaLM was around 360 times larger than GPT-2 and cost 160 times more.
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Leveraging its proprietary architecture and adaptive learning frameworks, our MaaS (Model-as-a-Service) business achieved 167.4% year-over-year (“YoY”) growth in 2024, contributing 73.0% of total revenue, supporting our total revenue to further increase to US$70.31 million.
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Across the board, large language and multimodal models are becoming larger and pricier. New business model must be introduced to support the feasibility of commercialization. Model as a Service (“MaaS”) embodies the core concept of providing AI models as a service to users, rather than directly selling the models themselves.
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This exponential trajectory underscores Hua Zang LLM’s ability to deliver enterprise-grade solutions across industries—from investment modeling to customer services in Banking industry—while maintaining cost-efficiency through dynamic resource allocation and lightweight deployment strategies.
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This business model effectively reduces the barriers to using AI technology, enabling a broader range of businesses and developers to conveniently access and leverage AI models, thereby fostering widespread application and innovation in AI technology.
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By integrating Hua Zang LLM with cloud-native platforms and hybrid computing infrastructures, we have empowered clients to harness cutting-edge AI without the prohibitive overheads traditionally associated with LLM adoption. Parallel to our B2B success, 2024 marked a strategic pivot toward consumer-facing AI applications. The launch of our AI-powered smart glasses in the second half of 2024 exemplifies this shift.
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As a global leader in AI, we have been offering AI models as a service since 2018, including Natural Language Processing (“NLP”) models and image models, among others. In June 2023, the company launched its own LLM, the Hua Zang LLM, which garnered widespread attention from customers upon its release.
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Designed for seamless human-AI collaboration, these devices integrate real-time language translation, contextual environmental analysis, and augmented reality overlays—all powered by our proprietary edge-computing frameworks. Early adoption in North American markets has driven 1751.5% growth in hardware sales, positioning this product line as a catalyst for global retail expansion.
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In 2023, our MaaS business accounted for over 30% of the total revenue for the first time. By way of delivery, MaaS and non-MaaS product can be delivered in different ways: software delivery, embedded in hardware products, technology development services, maintenance services and cloud platform subscription.
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Notably, our hardware revenue also generated incremental revenue in international markets, validating our dual focus on technical excellence and consumer-centric design. Looking ahead, we remain committed to bridging the gap between foundational AI research and scalable commercialization.
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Business Highlights As a global leader in Cognitive Intelligence, we have developed to be at the forefront of innovation since the establishment in 2001. With a strong focus on natural language processing and cognitive intelligence, we have consistently pushed the boundaries of technology to achieve scalable implementation and commercialization of our groundbreaking outcomes.
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By aligning with trends such as vertical-specific model refinement, cost-optimized inference, and ethical AI governance, we aim to solidify our leadership in both enterprise and consumer ecosystems. As the AI landscape evolves from a “race for size” to a “pursuit of value,” our hybrid MaaS and hardware strategies will continue to unlock transformative opportunities—for businesses, individuals, and society at large.
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Guided by the mission to serve and benefit more people with their AI technology, we remain committed to continuous innovation and breakthroughs in the field of artificial intelligence. In 2023, our total revenue reached US$59.17 million, reflecting a year-on-year increase of 22.8%.
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Recent Developments During the year ended December 31, 2024, and into early 2025, Xiao-I Corporation undertook a series of registered offerings pursuant to its shelf registration statement on Form F-3. These offerings involved the issuance of convertible promissory notes and, in certain cases, related ADSs issued at par value to institutional investors.
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We have explored the business models for AI model services and rapidly advanced the commercialization process of our models. In 2023, our MaaS business grew by 48.5%, reaching US$19.19 million, with the primary contributions attributed to our Hua Zang LLM. Concurrently, we have delved deeper into understanding customer needs and have facilitated the renewal of non-MaaS business contracts.
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The transactions were completed in June 2024, October 2024, and January 2025, providing the company with aggregate gross proceeds of approximately $10 million. Each offering included customary terms such as fixed or variable conversion prices, anti-dilution protections, and covenants limiting future indebtedness and equity issuances on more favorable terms.
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Within the year, non-MaaS business revenue grew by 13.4%, achieving US$39.97 million. By way of delivery, we generate the majority of our revenue from fees charged to our customers based on (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software products, (iv) M&S service, and (v) sale of hardware products.
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The proceeds were used to support the company’s general corporate purposes and strategic initiatives. During the same period, the company became subject to litigation relating to its initial public offering and post-IPO disclosures.
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The sale of software products accounted 45.8%, 7.4% and 2.6% of total revenue for the years ended December 31, 2021, 2022 and 2023, respectively, while revenue from sale of cloud platform products accounted 17.1%, 53.4% and 79.5% of total revenue for the years ended December 31, 2021, 2022 and 2023, respectively.
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Securities class action lawsuits were filed in New York state court and U.S. federal court alleging material misstatements and omissions in the company’s offering materials and subsequent SEC filings. Xiao-I is actively contesting these claims. In addition, the company continued to pursue its patent litigation against Apple Inc. in China.
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In October 2023, we introduced the Hua Zang Universal Large Language Model Ecosystem (the “Hua Zang Ecosystem”), marking a significant milestone in our journey. This ecosystem has been meticulously crafted to streamline the development, application, and operational aspects of our cognitive intelligence solutions, fostering a remarkable synergy that enhances speed, cost-effectiveness, and overall efficiency.
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The Beijing Intellectual Property Court ruled in Xiao-I’s favor by confirming the validity of one of its patents, and trial proceedings for the infringement claims concluded before the Shanghai High Court in mid-2024, with a decision pending as of the date of this filing. 72 The company also addressed Nasdaq listing compliance issues.
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Our tailor-made solutions cater to specific business requirements, empowering organizations to create unique and branded conversational AI experiences. With a core focus on “Business Monetization,” the Hua Zang Ecosystem offers three service guarantees in the areas of incubation, marketing, and investment.
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In July 2024, Xiao-I received a deficiency notice from Nasdaq due to the bid price of its ADSs remaining below $1.00 for a sustained period. To regain compliance, the company effected a reverse ADS split in August 2024. Following this adjustment, Nasdaq confirmed in September 2024 that Xiao-I had regained compliance with the minimum bid price requirement.
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As a result, we anticipate realizing its commercial potential and generating substantial returns for the company in the near future. 83 We remain committed to innovation-driven technological innovation and have consistently increased our investment in research and development. In 2023, our R&D expenditure reached US$52.39 million, marking a year-on-year increase of 118.3%.
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For additional information regarding these developments, see “
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Moving forward, we expect to continue to focus on technology as the foundation of our operations to maintain the competitiveness of our products. Finally, our internationalization strategy has been progressing steadily. On May 18, 2023, AI Plus established its wholly owned US subsidiary, Xiao-I Plus Inc.
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On March 1, 2024, AI Plus established its wholly owned United Arab Emirates subsidiary, Xiao-I Super Ltd. 2024 Outlook MaaS Product and B2C Expansion In 2024, we expect that the Hua Zang LLM is set to further strengthen its commercialization efforts.
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Leveraging our extensive commercialization experience and a successful track record of delivering more than 1,000 projects, we will delve deeper into understanding and meeting customer needs. This will be instrumental in expanding and upgrading the customer base for our Hua Zang LLM products, thereby, we anticipate that we will achieve a robust and steady growth in our B2B business.
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The advent of LLM has significantly expanded the potential for AI in consumer applications. We believe the integration of AI models and consumer applications have become more seamless and impactful, driving innovation and meeting consumer demand more effectively. Hence, we further expanded our business into B2C (business to customer) market.
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The following is a summary of the status of pipeline of our B2C products in production and under development, as of the date of this Annual Report on Form 20-F: Product By Way of Delivery Model in Service Target Launching Time Status AI Try-on Product Cloud Platform Product Image Model May 2024 In development AI Agent Product Cloud Platform Product Hua Zang LLM May 2024 In development AI Baby Crib Hardware Product Hua Zang LLM June 2024 In development AI Product for Disabled Hardware Product Hua Zang LLM May 2024 In development Globalization Strategy In 2024, building upon the establishment of our overseas subsidiaries, namely the North American and Middle Eastern subsidiaries, we plan to focus on expanding our presence in international markets.
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Specifically, targeting the B2B sector, we plan to promote and implement our mature AI applications in these overseas markets. As for B2C market, we anticipate that all the B2C MaaS products will be launched in oversea market simultaneously in 2024.
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Cash Flow and R&D Investment Trends Our R&D investments are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in AI technology development. We are simultaneously investing in AI model development and productization, data center and server development.
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The pace of our R&D spend may vary depending on overall priority among projects, the pace at which we meet milestones, productization adjustments to and among our various products, increased investment efficiencies and the addition of new projects.
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Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth, we currently expect our R&D investment to remain at the similar value as year of 2023, between $50 to $60 million in each of the following two fiscal years. 84 Our revenue growth is generally facilitating positive cash generation.
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We have and will continue to boost up the commercialization and productization of our AI models and technologies, expand our product roadmap and provide more AI applications to our customers, to further enhance the revenue growth rate.
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At the same time, we are likely to see heightened levels of R&D expenditures during certain periods depending on the specific pace of our R&D projects and other potential variables mentioned below in Major Factors Affecting Our Results of Operations.
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Major Factors Affecting Our Results of Operations Our business and operating results are affected by the general factors that affect the global robotics industry, particularly the software robotics industry. These factors include technological advancements such as AI and cloud computing, increases in per capita disposable income, as well as shortage of labor supply.
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Any changes in these general factors could potentially affect the demand for our products and services, consequently impacting our results of operations.
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While we acknowledge that our business is subject to general influences, we believe that our results of operations are more directly affected by the following specific factors: Continued Monetization of Robot Products and Services Our long-term growth will depend on our continued ability to expand our customer base and increase revenue from MaaS and non-MaaS business.
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We have developed products and services in different industries. MaaS We currently provide CIAI model, image model and Hua Zang LLM. Our CIAI platform products and services are marketed and sold primarily to customers in the following industries: (1) Contact Center, (2) Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing and (7) Smart Healthcare.
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In June 2023, we launched Hua Zang LLM which is a foundational model with versatile capabilities, meticulously developed by us through independent research. It integrates the latest Al algorithms, drawing upon massive data, cross-lingual and multitask training, and domain knowledge, with the traits of controllability, customizability and deployability.
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Non-MaaS We currently provide AI Chatbot, Live Chat, Smart Agent Assistant, Smart Coach, Intelligent Knowledge Management, Smart lVR, Smart Outbound Call, and RPA. According to Frost & Sullivan, Shanghai Xiao-i has been focusing on developing cognitive intelligence technologies based on its cutting-edge natural language processing and AI implementation in businesses, enjoying a privileged reputation in AI industry.
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As a leading AI technology and industrialization service platform in the world, through years of operation, Shanghai Xiao-I has established extensive cooperation with many leading companies amongst various industry verticals. As a result, we are well positioned to capture significant monetization opportunities. LLMs have demonstrated remarkable capabilities, however, standalone LLMs may face limitations in terms of domain specificity and actionability.
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The integration of LLM and traditional AI product would have better delivery result in practice.
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Thus, we intend to leverage our experience of traditional AI products, integrate non-MaaS product with LLM, and deliver AI product with better experiences in the near future. 85 Sales and Marketing We have built our Xiao-i (Chinese: 小i机器人) brand through a multitude of avenues, including: ● industry trade shows; ● academic seminars; ● publicity of major milestones and achievements; and ● collaboration with relevant partners.
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With these approaches, we have successfully built our brand and expanded customer markets. Our software business has experienced steady growth during the past few years. Competition Industry competition is intense, but there is significant market potential in the rapidly growing AI industry. We compete with various integrated AI services providers in MaaS industry.
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Our products’ main competitors include OpenAI, Cohere, Anthropic, Baidu, Google, and Microsoft. To further enhance our market position, we will leverage on our good customer relationships developed in the past 1000 delivery cases, practically commercialized our technologies into product. Other than B2B market, we will also explore the potential from B2C market.
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In addition, we will be actively seek for oversea market development to further expand our market size. Technology We have a strong human-computer cognitive interaction ability, which is known as “representative of conversational AI enterprises” by Gartner. Our technical strength and academic status have also been recognized on the international platform.
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We are a technology-driven company and our research and development staffs are an important asset for us. To further strengthen our technological ability, we have set training courses and talent development plans to nurture the staffs. With aligned interests, we promote our research and development ability to respond to the rapidly changing market.
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Intellectual Property Our intellectual property includes trademarks related to our brands and services, copyrights in software, patents and other intellectual property rights and licenses.
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We seek to protect our intellectual property assets and brand through a combination of monitoring and enforcement of trademark, patent, copyright and trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality agreements and procedures.
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For further details, see “Risk Factors — Risks Relating to Our Business and Industry — We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of business ” of this annual report.
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For the fiscal year of 2023, the Company applied for 19 new patents, and registered 38 new patents and 16 AI copyrights. Among those, 19 new patents applications and 2 AI copyrights are related to Hua Zang LLM. 86 Regulations on Intellectual Property Rights China has adopted legislation governing intellectual property rights, including trademarks, patents and copyrights.
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China is a signatory to the major international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001. In China, holders of computer software copyrights enjoy protection under the Copyright Law.
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Various regulations relating to the protection of software copyrights in China have been promulgated, including the Copyright Law, which was originally promulgated in 1990, the Regulation for the Implementation of the Copyright Law, which originally came into effect in September 2002, and the Measures for the Registration of Computer Software Copyright, which were issued by the National Copyright Administration in 2002.
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Under these regulations, computer software that is independently developed and exists in a physical form is protected, and software copyright owners may license or transfer their software copyrights to others. Registration of software copyrights, exclusive licensing and transfer contracts with the Copyright Protection Center of China or its local branches is encouraged.
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Such registration is not mandatory under Chinese law, but can enhance the protections available to the registered copyrights holders. The Computer Software Copyright Registration Procedures, issued by the National Copyright Administration in 2002, apply to software copyright registration, license contract registration and transfer contract registration.
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We have registered software copyrights in compliance with the above rules and to take advantage of the protections under them. Impact of Foreign Exchange Fluctuation As we derive our revenue in RMB, foreign exchange rate fluctuations may adversely affect our business and performance.
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The exchange rates between US$ and RMB are subject to continuous movements affected by international political and economic conditions and changes in the PRC government’s economic and monetary policies. Any appreciation of RMB, against US$ will decrease our profit margin.
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On the other hand, any depreciation of RMB against US$ will adversely affect our ability to pay for foreign currency obligations. RESULTS OF OPERATIONS The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our revenues for the periods presented.
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This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
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For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Net revenue 32,524,013 100.0 % 48,184,958 100.0 % 59,165,259 100.0 % Cost of revenues (10,885,731 ) (33.5 )% (17,379,144 ) (36.1 )% (19,741,689 ) (33.4 )% Gross profit 21,638,282 66.5 % 30,805,814 63.9 % 39,423,570 66.6 % Selling expenses (4,620,113 ) (14.2 )% (3,911,818 ) (8.1 )% (4,550,997 ) (7.7 )% General and administrative expenses (6,657,251 ) (20.5 )% (6,028,637 ) (12.5 )% (4,407,215 ) (7.4 )% Research and development expenses (5,363,909 ) (16.5 )% (24,001,138 ) (49.8 )% (52,387,540 ) (88.5 )% Other loss, net (1,079,652 ) (3.3 )% (2,208,880 ) (4.6 )% (1,295,894 ) (2.2 )% Profit/(Loss) before tax 3,917,357 12.0 % (5,344,659 ) (11.1 )% (23,218,076 ) (39.2 )% Income tax expenses (552,355 ) (1.7 )% (660,655 ) (1.4 )% (3,787,692 ) (6.4 )% Net income/(loss) 3,365,002 10.3 % (6,005,314 ) (12.5 )% (27,005,768 ) (45.6 )% 87 KEY COMPONENTS OF RESULTS OF OPERATIONS Net revenues In terms of product lines, we generate revenue primarily from the (i) MaaS and (ii) non-MaaS.
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The following table sets forth the product lines of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % MaaS 5,532,917 17.0 % 12,924,039 26.8 % 19,193,177 32.4 % Non-MaaS 26,991,096 83.0 % 35,260,919 73.2 % 39,972,082 67.6 % Total 32,524,013 100.0 % 48,184,958 100.0 % 59,165,259 100.0 % By way of delivery, we generate revenue primarily from the (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software products, (iv) M&S service, and (v) sale of hardware products.
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For the years ended December 31, 2021, 2022 and 2023, our total revenue was US$32.52 million, US$48.18 million and US$59.17 million, respectively.
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The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Sale of cloud platform products 5,550,959 17.1 % 25,742,135 53.4 % 47,007,556 79.5 % Technology development service 9,246,992 28.4 % 16,419,889 34.1 % 7,839,700 13.3 % Sale of software products 14,878,256 45.8 % 3,547,113 7.4 % 1,566,455 2.6 % M&S service 2,772,795 8.5 % 2,429,526 5.0 % 2,676,185 4.5 % Sale of hardware products 75,011 0.2 % 46,295 0.1 % 75,363 0.1 % Total 32,524,013 100.0 % 48,184,958 100.0 % 59,165,259 100.0 % 88 Cost of revenues Our cost of revenues primarily consists of the following components: (i) staff costs (salaries and employee benefits), (ii) cost of materials, which primarily includes software and hardware purchased, (iii) cloud hosting service fees, and (iv) overhead costs relating to consumables and office expenses used for production.
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The following table sets forth the components of our cost of revenues by amounts and percentages of net revenues for the periods presented: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Cost of materials 1,353,687 4.2 % 8,249,674 17.1 % 4,656,013 7.9 % Staff costs 5,636,003 17.3 % 7,499,583 15.6 % 8,772,340 14.8 % Cloud hosting services fees 3,671,322 11.3 % 1,313,492 2.7 % 6,232,533 10.5 % Others 224,719 0.7 % 316,395 0.7 % 80,803 0.1 % Total 10,885,731 33.5 % 17,379,144 36.1 % 19,741,689 33.3 % The following table sets forth the cost of revenue of different product lines of our revenue by amounts and percentages of net revenue for the periods indicated: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Cost of MaaS 1,474,239 4.5 % 1,590,936 3.3 % 6,537,836 11.1 % Cost of Non-MaaS 9,411,492 28.9 % 15,788,208 32.8 % 13,203,853 22.3 % Total 10,885,731 33.5 % 17,379,144 36.1 % 19,741,689 33.4 % The following table sets forth the cost of revenue of different revenue types by amounts and percentages of net revenue for the periods indicated: For the Years Ended December 31, 2021 2022 2023 USD % USD % USD % Cost of sale of cloud platform products 3,831,160 11.8 % 3,015,766 6.3 % 11,825,171 20.0 % Cost of technology development service 4,390,825 13.5 % 12,194,044 25.3 % 6,059,330 10.3 % Cost of sale of software products 771,293 2.4 % 888,220 1.8 % 834,570 1.4 % Cost of M&S service 1,862,483 5.7 % 1,255,973 2.6 % 971,417 1.6 % Cost of Sale of hardware products 29,970 0.1 % 25,141 0.1 % 51,201 0.1 % Total 10,885,731 33.5 % 17,379,144 36.1 % 19,741,689 33.4 % Selling expenses Selling expenses primarily consist of: (i) salaries and benefits for our sales and marketing personnel; (ii) advertising costs and market promotion expenses; (iii) traveling expenses incurred by our sales and marketing personnel for business purposes; and (iv) others, which primarily include entertainment expenses related to selling and marketing functions, office expenses and consulting expenses. 89 General and administrative expenses General and administrative expenses primarily consist of: (i) salaries and benefits for our administrative personnel; (ii) rental expenses relating to our leased properties used for administrative purposes and utilities which is primarily represented by water, electricity charges for administrative purposes; (iii) professional fees, which primarily represented fees we paid for legal services, audit services and consultation in the ordinary course of our business; (v) credit losses expenses, which primarily represented the credit losses of accounts receivable and prepaid expenses and other current assets, and (vi) others, which primarily include depreciation and amortization expenses, office expenses for office supplies and consumables, and other miscellaneous expenses for administrative purposes.
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Research and development expenses Research and development expenses primarily include: (i) salaries and benefits for research and development personnel; (ii) service fees to purchase of computing power for R&D projects; (iii) professional services fees, which primarily represent fees paid for professional services in research and development activities; (iv) patent registration related expenses and patent litigation expenses; (v) amortization, which represents amortization expenses for our intangible assets; and (vi) others, which primarily include rental expenses, consumables, traveling expenses, utilities and miscellaneous expenses.
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Income Tax Expenses Cayman Islands Our company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act and accordingly is not subject to income tax from business carried in Cayman Islands.
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Hong Kong In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income.
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In March 2018, the Hong Kong Government introduced a two-tiered profit tax rate regime by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the “Ordinance”). Under the two-tiered profits tax rate regime, the first HK dollar 2 million of assessable profits of qualifying corporations is taxed at 8.25% and the remaining assessable profits at 16.5%.
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The Ordinance is effective from the year of assessment 2018-2019. According to the policy, if no election has been made, the whole of the taxpaying entity’s assessable profits will be chargeable to Profits Tax at the rate of 16.5% or 15%, as applicable.
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Because the preferential tax treatment is not elected by us, our subsidiaries registered in Hong Kong are subject to income tax at a rate of 16.5%. Payments of dividends by the subsidiary to us are not subject to withholding tax in Hong Kong.
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PRC Generally, our PRC subsidiaries are subject to enterprise income tax on their taxable income in China at a statutory rate of 25%, except for our certain PRC subsidiaries that are qualified as high and new technology enterprises under the PRC Enterprise Income Tax Law and are eligible for a preferential enterprise income tax rate of 15%.
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The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. In accordance with the implementation rules of EIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Xu founded and continues to run Shanghai Liancheng Real Estate Appraisal and Consulting Co., Ltd., Shanghai Zhonggulian Information Technology Co., Ltd., Shanghai Puruo Information Technology Limited Partnership, Shanghai Gravel Bank Business Information Consulting Limited Partnership, entities primarily engaged in asset appraisal, consulting and other related businesses. Mr.
Mr. Xu founded and continues to run Shanghai Liancheng Real Estate Appraisal and Consulting Co., Ltd., Shanghai Zhonggulian Information Technology Co., Ltd., Shanghai Puruo Information Technology Limited Partnership, Shanghai Gravel Bank Business Information Consulting Limited Partnership, entities primarily engaged in asset appraisal, consulting and other related businesses. Mr.
Our amended and restated memorandum and articles of association provide that that we shall indemnify our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such persons, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.
Our Memorandum and Articles of Association provide that that we shall indemnify our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such persons, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our Company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our Company or its affairs in any court whether in the Cayman Islands or elsewhere.
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board. 109 Compensation Committee .
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board. 96 Compensation Committee .
We may grant awards to our employees, directors and consultants. Vesting schedule . In general, the plan administrator or, in its absence, the compensation committee determines the vesting schedule, which is specified in the relevant award agreement. Exercise of awards .
We may grant awards to our employees, directors and consultants. Vesting schedule . In general, the plan administrator or, in its absence, the compensation committee determines the vesting schedule, which is specified in the relevant award agreement. 94 Exercise of awards .
A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated.
A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our Company to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated. 97 D.
Xu earned his MBA degree from China Europe International Business School in 2017. 104 Dr. Zhong Lin D r. Zhong Lin is an independent director of Xiao-I Corporation. Dr. Lin possesses more than 25 years’ experience in the areas of international commercial law and is the founder and Managing Partner of Leadvisor Law, a leading China-based business law firm. Dr.
Xu earned his MBA degree from China Europe International Business School in 2017. 91 Dr. Zhong Lin D r. Zhong Lin is an independent director of Xiao-I Corporation. Dr. Lin possesses more than 25 years’ experience in the areas of international commercial law and is the founder and Managing Partner of Leadvisor Law, a leading China-based business law firm. Dr.
Our directors may exercise all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital and to issue debentures or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party. 108 Director Independence Our board has reviewed the independence of our directors, applying Nasdaq independence standards.
Our directors may exercise all the powers of our Company to borrow money, mortgage or charge its undertaking, property and uncalled capital and to issue debentures or other securities whenever money is borrowed or as security for any debt, liability or obligation of our Company or of any third party. 95 Director Independence Our board has reviewed the independence of our directors, applying Nasdaq independence standards.
We primarily recruit our employees through on-campus job fairs, recruitment agencies and online channels, including our corporate website and third-party employment websites. We provide regular training and reviews to our employees to enhance their performance. Substantially all of our employees as of March 31, 2024 are stationed in China.
We primarily recruit our employees through on-campus job fairs, recruitment agencies and online channels, including our corporate website and third-party employment websites. We provide regular training and reviews to our employees to enhance their performance. Substantially all of our employees as of December 31, 2024 are stationed in China.
Board Diversity Matrix Country of Principal Executive Offices China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Part I: Gender Identity Female Male Non-Binary Did Not Disclose Gender Directors 1 4 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 1 LGBTQ+ 0 Did Not Disclose Demographic Background 0 105 Family Relationships There are no family relationships among the directors and executive officers of the Company.
Board Diversity Matrix Country of Principal Executive Offices China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 4 Part I: Gender Identity Female Male Non-Binary Did Not Disclose Gender Directors 0 4 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 92 Family Relationships There are no family relationships among the directors and executive officers of the Company.
David Sherman (1)(3)(5) 75 Independent Director (1) Audit committee member (2) Compensation committee member (3) Nominating and Corporate Governance committee member (4) Executive Director (5) Non-Executive Director The current business address for our executive officers and board of directors is c/o Xiao-I Corporation, 5th Floor, Building 2, No. 2570 Hechuan Road, Minhang District, Shanghai, China, 201103. 103 Director and Executive Officer Biographies Mr.
David Sherman (1)(3)(5) 76 Independent Director (1) Audit committee member (2) Compensation committee member (3) Nominating and Corporate Governance committee member (4) Executive Director (5) Non-Executive Director The current business address for our executive officers and board of directors is c/o Xiao-I Corporation, 5th Floor, Building 2, No. 2570 Hechuan Road, Minhang District, Shanghai, China, 201103. 90 Director and Executive Officer Biographies Mr.
Our board of directors consists of five directors. A director is not required to hold any shares in our company to qualify to serve as a director.
Our board of directors consists of four directors. A director is not required to hold any shares in our Company to qualify to serve as a director.
We enter into standard employment, confidentiality and non-compete agreements with our employees. As required by PRC laws and regulations, we participate in housing fund and various employee social security plans that are organized by applicable local municipal and provincial governments, including housing, pension, medical, work-related injury and unemployment benefit plans. None of our employees are currently represented by labor unions.
We enter into standard employment, confidentiality and non-compete agreements with our employees. As required by PRC laws and regulations, we participate in housing fund and various employee social security plans that are organized by applicable local municipal and provincial governments, including housing, pension, medical, work-related injury and unemployment benefit plans.
D. Employees. As of March 31, 2024, we had 281 full-time employees. The following table sets forth the number of our full-time employees by function as of March 31, 2024: Function/Department Management 57 Sales and Marketing 46 Research and Development 158 Production 20 Total 281 Our success depends on our ability to attract, retain and motivate qualified employees.
Employees. As of December 31, 2024, we had 162 full-time employees. The following table sets forth the number of our full-time employees by function as of December 31, 2024: Function/Department Management 57 Sales and Marketing 46 Research and Development 95 Production 20 Total 162 Our success depends on our ability to attract, retain and motivate qualified employees.
Prior to joining Shanghai Xiao-i in 2015, she worked in a leading international accounting firm for seven years, and is proficient in financial accounting, financial regulations and other professional knowledge. She received her bachelor’s degree in accounting and management from Lixin Accounting College in Shanghai in 2008. Ms. Xiaomei Wu Ms. Xiaomei Wu is director of Xiao-I Corporation. Ms.
Prior to joining Shanghai Xiao-I in 2015, she worked in a leading international accounting firm for seven years, and is proficient in financial accounting, financial regulations and other professional knowledge. She received her bachelor’s degree in accounting and management from Lixin Accounting College in Shanghai in 2008. Mr. Jun Xu Mr. Jun Xu is an independent director of Xiao-I Corporation.
Directors and Executive Officers Age Position/Title Hui Yuan (2)(3)(4) 50 Chief Executive Officer, Director, Chairman of the Board of Directors Wei Weng 38 Chief Financial Officer Xiaomei Wu (5) 54 Director Jun Xu (1)(2)(3)(5) 49 Independent Director Zhong Lin (1)(2)(3)(5) 54 Independent Director H.
Directors and Executive Officers Age Position/Title Hui Yuan (2)(3)(4) 51 Chief Executive Officer, Director, Chairman of the Board of Directors Wei Weng 39 Chief Financial Officer Jun Xu (1)(2)(3)(5) 50 Independent Director Zhong Lin (1)(2)(3)(5) 55 Independent Director H.
Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
Terms of Directors Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
However, no such action may adversely affect in any material way any award previously granted without prior written consent of the participant. 107 Limitation on Liability and Other Indemnification Matters Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
Limitation on Liability and Other Indemnification Matters Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
For the fiscal year ended December 31, 2023, we paid an aggregate of US$732,062 in cash to our executive officers, and we paid US$126,395 to our non-executive director. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
B. Compensation. Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2024, we paid an aggregate of US$404,072.43 in cash to our executive officers, and we paid US$93,008.36 to our non-executive director. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
We have the right to seek damages if a duty owed by our directors is breached.
We have the right to seek damages if a duty owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
We believe that we maintain good working relationship with our employees and we have not experienced any material labor disputes. E. Share Ownership. For information regarding the share ownership of directors and officers, see “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders.” For information as to our equity incentive plan, see “Item 6.B.
“Consolidated Statements and Other Financial Information—Litigation,” we have not experienced any material labor disputes. E. Share Ownership. For information regarding the share ownership of directors and officers, see “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders.” For information as to our equity incentive plan, see “Item 6.B. Director, Senior Management and Employees—Compensation—2025 Share Incentive Plan.” F.
Termination and amendment . Unless terminated earlier, the 2023 Plan has a term of ten years. Our board of directors may terminate, amend or modify the plan, subject to the limitations of applicable laws.
Termination and amendment . Unless terminated earlier, the 2023 Plan has a term of ten years. Our board of directors may terminate, amend or modify the plan, subject to the limitations of applicable laws. However, no such action may adversely affect in any material way any award previously granted without prior written consent of the participant.
He has served on the board and as audit chair of several U.S. and Chinese businesses, including Kingold Corporation (NYSE: KGJI), China HGS Real Estate Inc. (NASDAQ: HGSH), Agfeed Corporation, Dunxin (DXF — NYSE/Amer) and China Growth Alliance, Ltd. He also serves on two nonprofit boards: American Academy of Dramatic Arts, and D-Tree International.
(NASDAQ: PWM) Lakeshore Acquisition III Corp (NASDQ: LBBB), Natures Miracle Holdings, Inc (NMHI), He has served on the board and as audit chair of several U.S. and Chinese businesses, including Kingold Corporation (NYSE: KGJI), China HGS Real Estate Inc. (NASDAQ: HGSH), Agfeed Corporation, Dunxin (DXF — NYSE/Amer) and China Growth Alliance, Ltd.
Professor Sherman teaches Northeastern University MBA courses in accounting, control, and global financial statement analysis with a focus on international shareholder reporting.
Professor Sherman teaches Northeastern University MBA courses in accounting, control, and global financial statement analysis with a focus on international shareholder reporting. Professor Sherman currently serves as a board member and chair of the audit committee for Nuvve (NYSE: NVVE), Prestige Wealth Inc.
Professor Sherman was on the faculty of the Sloan School of Management at Massachusetts Institute of Technology from 1981 to 1984. Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
The Award payout shall be made to the CEO and CFO in a lump sum as soon as practicable, but in all cases within two and one-half (2-1/2) months following the vesting date, which is the Grant Date. 2023 Share Incentive Plan On November 30, 2022, the Company adopted our 2023 share incentive plan (the “2023 Plan”), to promote the success and enhance the value of the Company by linking the personal interests of the Directors, Employees, and Consultants to those of the Company’s shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s shareholders.
Share Incentive Plans To promote the success and enhance the value of the Company by linking the personal interests of the Directors, Employees, and Consultants to those of the Company’s shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s shareholders, the Company adopted the following share incentive plans. 2025 Share Incentive Plan On April 1, 2025, the Company adopted our 2025 Share Incentive Plan (the “2025 Plan”).
Director, Senior Management and Employees—Compensation—2023 Share Incentive Plan.” F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. Not applicable. 111
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. Not applicable. 98
As of the date of this annual report, we have not granted any awards under the 2023 Plan. 106 The following paragraphs summarize the principal terms of the 2023 Plan. Types of awards .
As of the date of this annual report, we have granted awards under the 2023 Plan, with 2,558,628 ordinary shares issued or issuable upon the vesting of outstanding RSUs and options, and 41,372 ordinary shares remaining available for future issuance under the 2023 Plan. The following paragraphs summarize the principal terms of the 2023 Plan. Types of awards .
Removed
Wu serves as a member of Shanghai Xiao-i’s supervisory board since 2013, and she has extensive experience in corporate management and corporate fund raising. From March 2017 to September 2020, Ms.
Added
He also serves on a nonprofit board: American Academy of Dramatic Arts. Professor Sherman was in the faculty of the Sloan School of Management at Massachusetts Institute of Technology from 1981 to 1984.
Removed
Wu served as the General Manager of Light Control Haiyin Fund in Everbright Holdings Management Service Co., LTD., responsible for the establishment of the fund, the whole investment process, post-investment management and the establishment and management of the fund team. From April 2010 to February 2017, Ms.
Added
He is a CPA, was an academic fellow at the SEC, and earned his master’s degree in business administration (MBA) in 1971 from Harvard Business School and his Doctorate Degree in Accounting and Accountability Systems from Harvard Business School in 1981.
Removed
Wu served as the founding partner of Haiyin (Tianjin) Equity Investment Management Co., LTD., where she was in charge of capital raising, limited partner management, project investment and post-investment management. From January 2005 to March 2009, Ms. Wu served as the General manager of Beijing Junping Technology Co., LTD., responsible for the overall operation management of the company. Ms.
Added
The Award payout shall be made to the CEO and CFO in a lump sum as soon as practicable, but in all cases within two and one-half (2-1/2) months following the vesting date, which is the Grant Date.
Removed
Wu received her EMBA from Peking University School of Private Economics in May 28, 2009 and her MBA from Concordia University — Wisconsin in December 2012. Mr. Jun Xu Mr. Jun Xu is an independent director of Xiao-I Corporation. Mr.
Added
Under the 2025 Plan, the maximum aggregate number of Ordinary Shares which may be issued pursuant to all awards shall initially be 4,214,684 shares, representing 12% of the total Ordinary Shares of the Company issued and outstanding on a fully diluted basis as of the adoption date of the Plan.
Removed
Professor Sherman currently serves as a board member and chair of the audit committee for Nuvve (NYSE: NVVE), Universe Pharmaceutical Corp (NYSE: UPC), Lakeshore Acquisition I Corp (NYSE: LAAA), Lakeshore Acquisition II Corp (NYSE: LBBB), and Prime Number Acquisition I Corp. (NYSE: PNACU).
Added
In addition, on January 1 of each fiscal year following the adoption of the 2025 Plan, if the aggregate number of Ordinary Shares reserved and available for future grants of awards under the 2025 Plan falls below 3.0% of the total Ordinary Shares issued and outstanding on a fully diluted basis as of the last day of the immediately preceding calendar year (the “Limit”), the number of shares reserved for issuance under the 2025 Plan will automatically be increased to equal the Limit, subject to the discretion of the Board to authorize additional increases.
Removed
B. Compensation. Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2022, we paid an aggregate of US$95,014 in cash to our executive officers, and we paid US$40,190 to our non-executive director.
Added
For these purposes, the number of Ordinary Shares issued and outstanding on a fully diluted basis is calculated by assuming the conversion, exercise, or exchange of all outstanding preferred shares, options, warrants, convertible notes, and other equity securities into Ordinary Shares.
Removed
In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached. 110 Terms of Directors Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders.
Added
As of the date of this annual report, the Company have granted RSUs under the 2025 Plan, representing in total 1,407,144 ordinary shares, to three external consultants for services, with the weighted average estimated fair value on the grant date of each ordinary shares underlying of $0.91.
Added
Each RSU represents the right to receive one ADS of the Group and fully vested upon grant. The following paragraphs summarize the principal terms of the 2025 Plan. Types of awards . The 2025 Plan permits the award of options, restricted shares, restricted share units, or other types of awards approved by the board of directors or the compensation committee.
Added
Plan administration . Our board of directors or the compensation committee administers the 2025 Plan. The board or the committee determines, among other things, the participants to receive awards, the type and number of awards granted, and the terms and conditions of each grant. Award agreement .
Added
Awards under the 2025 Plan are evidenced by an award agreement that sets forth the terms, conditions, and limitations of each award, which may include the term of the award, provisions applicable upon a participant’s termination of service, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel, or rescind an award. 93 Eligibility.
Added
We may grant awards to our employees, directors, and consultants. Vesting schedule. The vesting schedule for each award is determined by the plan administrator or, in its absence, the compensation committee, and is specified in the relevant award agreement. Exercise of awards.
Added
The exercise price per share subject to an option is determined by the plan administrator or the compensation committee and set forth in the award agreement, and may be a fixed price or a variable price related to the fair market value of the shares. The exercise period and expiration of options are also determined at the time of grant.
Added
Transfer restrictions . Awards under the 2025 Plan may not be transferred by a participant other than in limited circumstances, such as transfers to family members, trusts, or other permitted entities, subject to the approval of the plan administrator. Termination and amendment.
Added
Unless terminated earlier, the 2025 Plan will remain in effect for ten years from the date of its adoption.
Added
Our board of directors may terminate, amend, or modify the 2025 Plan, subject to applicable laws and provided that no such action may materially adversely affect any previously granted award without the participant’s consent. 2023 Share Incentive Plan On November 30, 2022, the Company adopted our 2023 share incentive plan (the “2023 Plan”), to promote the success and enhance the value of the Company by linking the personal interests of the Directors, Employees, and Consultants to those of the Company’s shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s shareholders.
Added
By deploying AI Co-pilot systems across development workflows, we have significantly reduced dependency on junior engineers while expanding strategic roles in senior architecture design, prompt engineering, and AI model training in 2024. None of our employees are currently represented by labor unions. We believe that we maintain good working relationship with our employees and, except as disclosed in Item 8.A.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

32 edited+24 added−21 removed58 unchanged
The service fees shall consist of 100% of the profit before tax of Shanghai Xiao-i, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations.
The service fees shall consist of 100% of the profit before tax of Shanghai Xiao-I, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations.
Shanghai Xiao-i agrees not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships similar to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of Zhizhen Technology.
Shanghai Xiao-I agrees not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships similar to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of Zhizhen Technology.
(1) Includes shares held by ZunTian Holding Limited and iTeam Holding Limited and shares Mr. Yuan shall receive because of the equity awards granted to him on January 3, 2024 (see B. Compensation under Item 6. Directors, Senior Management and Employees). 112 (2) Includes shares Ms.
(1) Includes shares held by ZunTian Holding Limited and iTeam Holding Limited and shares Mr. Yuan shall receive because of the equity awards granted to him on January 3, 2024 (see B. Compensation under Item 6. Directors, Senior Management and Employees). (2) Includes shares Ms.
In addition, in the event that the spouse obtains any equity interest in Shanghai Xiao-i held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time. 116 As the lock-up period of some shareholders of Xiao-I has expired, the shareholders wish to withdraw their shares in Xiao-I, and in order to mirror the shareholding of Xiao-I at Shanghai Xiao-i, they need to correspondingly withdraw their shares in Shanghai Xiao-i.
In addition, in the event that the spouse obtains any equity interest in Shanghai Xiao-I held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time. 101 As the lock-up period of some shareholders of Xiao-I has expired, the shareholders wish to withdraw their shares in Xiao-I, and in order to mirror the shareholding of Xiao-I at Shanghai Xiao-I, they need to correspondingly withdraw their shares in Shanghai Xiao-I.
This agreement will continue with full force and effect until the earlier of the date on which Zhizhen Technology has acquired all of the Equity Interests in Shanghai Xiao-i, or this Agreement is terminated by the mutual written consent. 115 Exclusive Business Cooperation Agreement On March 29, 2019, Zhizhen Technology entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-i to enable Zhizhen Technology to engage in the development and operation of the Internet technology development in accordance with applicable laws.
This agreement will continue with full force and effect until the earlier of the date on which Zhizhen Technology has acquired all of the Equity Interests in Shanghai Xiao-I, or this Agreement is terminated by the mutual written consent. 100 Exclusive Business Cooperation Agreement On March 29, 2019, Zhizhen Technology entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-I to enable Zhizhen Technology to engage in the development and operation of the Internet technology development in accordance with applicable laws.
Xiao-I does not expect to pay dividends in the foreseeable future. If, however, it declares dividends on its Ordinary Shares, the depositary will pay you the cash dividends and other distributions it receives on Xiao-I’s Ordinary Shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.
Xiao-I does not expect to pay dividends in the foreseeable future. If, however, it declares dividends on its Ordinary Shares, the depositary will pay holders the cash dividends and other distributions it receives on Xiao-I’s Ordinary Shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.
The funds are interest-free, unsecured and repayable on demand. (e) Hui Yuan provided several interest-free loans to the Group for its daily operation needs before 2022. In 2023, the Group entered into agreement with Hui Yuan to establish an annual interest rate for the outstanding loans.
The funds are interest-free, unsecured and repayable on demand. (d) Hui Yuan provided several interest-free loans to the Group for its daily operation needs before 2022. In 2023, the Group entered into agreement with Hui Yuan to establish an annual interest rate for the outstanding loans.
The Company has not provided any financial support to the PRC operating entities for the fiscal years ended at December 31, 2021, 2022, but transferred cash through other subsidiaries and WFOE to VIE and its consolidated subsidiaries in 2023, and the variable interest entities accounted for an aggregate of 95%, 96% and 83% of the Company’s total assets, respectively.
The Company has not provided any financial support to the PRC operating entities for the fiscal years ended at December 31, 2022, but transferred cash through other subsidiaries and WFOE to VIE and its consolidated subsidiaries in 2023 and 2024, and the variable interest entities accounted for an aggregate of 96%, 83% and 98% of the Company’s total assets in 2022, 2023 and 2024, respectively.
Ordinary shares that a person has the right to acquire within 60 days of April 1, 2024 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all board members and executive officers as a group.
Ordinary shares that a person has the right to acquire within 60 days of April 30, 2025 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all board members and executive officers as a group.
The following table sets forth information with respect to the beneficial ownership, of our ordinary shares as of the date of April 1, 2024 by: ● each member of our board of directors and each of our executive officers ● our directors and executive officers as a group; and ● each person, or group of affiliated persons, known by us to own beneficially 5% or more of our outstanding ordinary shares.
The following table sets forth information with respect to the beneficial ownership, of our ordinary shares as of the date of April 30, 2025 by: ● each member of our board of directors and each of our executive officers ● our directors and executive officers as a group; and ● each person, or group of affiliated persons, known by us to own beneficially 5% or more of our outstanding ordinary shares.
The interest shall be calculated at an annual rate of 6.8% based on the actual number of days used from January 1, 2023. The maturity of the loans from Hui Yuan will be extended based on mutual consent. As of December 31, 2022 and 2023, the corresponding balance due to Hui Yuan was $8,581,743 and $7,505,290, respectively.
The interest shall be calculated at an annual rate of 6.8% based on the actual number of days used from January 1, 2023. The maturity of the loans from Hui Yuan will be extended based on mutual consent. As of December 31, 2023 and 2024, the corresponding balance due to Hui Yuan was $7,505,290 and $7,336,833, respectively.
Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of March 1, 2024 through the exercise of any option or other right.
Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of April 30, 2025 through the exercise of any option or other right.
As of the date of this annual report we have a total of 55 shareholders, with 6 of them owning more than 5% each, and 49 of them owning less than 5% each. The names of the entities and their corresponding ownership percentages are listed on the principal shareholders table above.
As of the date of this annual report, we have a total of 21 shareholders, with 1 of them owning more than 5% each, and 20 of them owning less than 5% each. The names of the entities and their corresponding ownership percentages are listed on the principal shareholders table above.
As of December 31, 2022 and 2023, $908,614 and US$688,277 of cash and cash equivalents were denominated in RMB, respectively. Xiao-I and its directly and indirectly wholly owned subsidiaries, AI Plus, Xiao-i Technology and Zhizhen Technology do not have any substantial assets or liabilities or result of operations.
As of December 31, 2023 and 2024, US$688,277 and US$461,382 of cash and cash equivalents were denominated in RMB, respectively. 102 Xiao-I and its directly and indirectly wholly owned subsidiaries, AI Plus, Xiao-I Technology and Zhizhen Technology do not have any substantial assets or liabilities or result of operations.
Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts due in the ordinary course of business.
Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or its share premium account, provided that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.
Indemnification Agreements We have entered into indemnification agreements with each of our directors and executive officers. See “Item 6.B. Directors and Senior Management—Compensation—Limitations on Liability and Indemnification Matters.” 2023 Share Incentive Plan See “Item 6.B.
Indemnification Agreements We have entered into indemnification agreements with each of our directors and executive officers. See “Item 6.B. Directors and Senior Management and Employees—Compensation—Limitation on Liability and Other Indemnification Matters.” 2025 Share Incentive Plan See “Item 6.B. Director, Senior Management and Employees—Compensation—2025 Share Incentive Plan.” 2023 Share Incentive Plan See “Item 6.B.
Name of Related Parties Relationship 1 Zhejiang Baiqianyin Network Technology Co., Ltd (“Zhejiang Baiqianyin”) An entity which has a common director of the Board of Directors with the Group 2 Shanghai Shenghan An entity which the Group holds 16.56% equity interests 3 Shanghai Aoshu Enterprise Management Partnership (Limited Partnership) (“Shanghai Aoshu”) An entity which is the Group’s employee stock ownership platform, and has a common director of the Board of Directors with the Group 4 Jiaxing Sound Core Intelligent Technology Co., LTD An entity which Shanghai Shenghan holds 20% equity interests 5 Hui Yuan Chairman of the board, one of the major shareholders holding 13.61% equity interests of the Company 6 Tianjin Haiyin Equity Investment Fund Partnership (Limited Partnership) (“Tianjin Haiyin”) A significant shareholder holding 5.18% equity interests of the Company 7 Jiaxing Chiyu Investment Partnership (limited Partnership) A significant shareholder holding 5.44% equity interests of the Company 8 Haiyin Capital Investment (International) Limited A subsidiary of Tianjin Haiyin 9 Zhizhen Guorui An entity which the Group holds 26% equity interests 10 Weng wei CFO of the Company 11 Shanghai Machinemind Intelligent Technology Co., Ltd.
Name of Related Parties Relationship 1 Zhejiang Baiqianyin Network Technology Co., Ltd (“Zhejiang Baiqianyin”) An entity which has a common director of the Board of Directors with the Group 2 Shanghai Shenghan An entity which the Group holds 16.56% equity interests 3 Shanghai Aoshu Enterprise Management Partnership (Limited Partnership) (“Shanghai Aoshu”) An entity which is the Group’s employee stock ownership platform, and has a common director of the Board of Directors with the Group 4 Jiaxing Sound Core Intelligent Technology Co., Ltd An entity which Shanghai Shenghan holds 20% equity interests 5 Hui Yuan Chairman of the board, one of the major shareholders holding 10.24% (excluded the preferred shares) equity interests of the Company 6 Jiaxing Chiyu Investment Partnership (limited Partnership) A predecessor shareholder which holds 5.44% equity interests of the Company 7 Haiyin Capital Investment (International) Limited A predecessor shareholder which holds 5.18% equity interests of the Company 8 Zhizhen Guorui An entity which the Group holds 26% equity interests 9 Shanghai Machinemind Intelligent Technology Co., Ltd.
Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares held by that person. The percentage of ordinary shares beneficially owned is computed on the basis of 24,015,592 ordinary shares outstanding as of December 31, 2023 on an as-converted basis.
Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares held by that person. The percentage of ordinary shares beneficially owned is computed on the basis of 37,381,009 ordinary shares outstanding as of April 30, 2025 on an as-converted basis.
The following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents of the PRC operating entities, which were included in the Company’s consolidated balance sheets and statements of comprehensive income/(loss) and statements of cash flows with intercompany transactions eliminated: For the year ended December 31, 2021 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 32,524,013 - - - 32,524,013 Cost of revenues - (10,885,731 ) - - - (10,885,731 ) Gross profit - 21,638,282 - - - 21,638,282 Operating expenses - (16,641,273 ) - - - (16,641,273 ) Income of VIE and VIE’s subsidiaries absorbed by WFOE - - 3,677,813 - (3,677,813 ) - Share of income in subsidiaries 3,677,813 - - - (3,677,813 ) - Total operating expenses 3,677,813 (16,641,273 ) 3,677,813 - (7,355,626 ) (16,641,273 ) Income from operations 3,677,813 4,997,009 3,677,813 - (7,355,626 ) 4,997,009 Other loss - (1,079,652 ) - - - (1,079,652 ) Income tax expenses - (552,355 ) - - - (552,355 ) Net income 3,677,813 3,365,002 3,677,813 - (7,355,626 ) 3,365,002 Net loss attributable to non-controlling interests - (312,811 ) - - - (312,811 ) Net income attributable to XIAO-I CORPORATION shareholders 3,677,813 3,677,813 3,677,813 - (7,355,626 ) 3,677,813 For the year ended December 31, 2021 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash used in operating activities - (11,887,122 ) - - - (11,887,122 ) Net cash provided by investing activities - 77,259 - - - 77,259 Net cash provided by financing activities - 12,192,952 - - - 12,192,952 Effect of exchange rate changes - 101,728 - - - 101,728 Net change in cash, cash equivalents and restricted cash - 484,817 - - - 484,817 Cash, cash equivalents and restricted cash, at beginning of year 1,105 825,920 - 4 - 827,029 Cash, cash equivalents and restricted cash, at end of year 1,105 1,310,737 - 4 - 1,311,846 118 As of December 31, 2022 Condensed Consolidating Schedule of Financial Position Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Assets Current assets: Cash and cash equivalents 1,104 1,025,141 - - - 1,026,245 Accounts receivable, net - 41,362,705 - - - 41,362,705 Amounts due from related parties - 346,517 - - - 346,517 Inventories - 768,216 - - - 768,216 Contract costs - 2,012,309 - - - 2,012,309 Deferred offering costs - 1,330,902 - - - 1,330,902 Advance to suppliers - 1,115,672 - - - 1,115,672 Prepaid expenses and other current assets, net 2 460,850 1 1 - 460,854 Total current assets 1,106 48,422,312 1 1 - 48,423,420 - - Non-current assets: Property and equipment, net - 219,470 - - - 219,470 Intangible assets, net - 637,114 - - - 637,114 Long-term investment - 204,899 2,647,593 - - 2,852,492 Right of use assets - 865,399 - - - 865,399 Deferred tax assets, net - 3,888,574 - - - 3,888,574 Prepaid expenses and other non-current assets - 3,697,675 - - - 3,697,675 Total non-current assets - 9,513,131 2,647,593 - - 12,160,724 TOTAL ASSETS 1,106 57,935,443 2,647,594 1 - 60,584,144 Liabilities Current liabilities: Short-term borrowings - 18,784,459 - - - 18,784,459 Accounts payable - 9,180,532 - - - 9,180,532 Amount due to related parties-current - 896,431 - - - 896,431 Deferred revenue - 2,553,808 - - - 2,553,808 Convertible loans - 3,754,269 - - - 3,754,269 Accrued expenses and other current liabilities - 17,006,680 30 3 - 17,006,713 Lease liabilities, current - 435,462 - - - 435,462 Deficit of VIE and VIE’s subsidiaries absorbed by WFOE - - 5,887,042 - (5,887,042 ) - Investment deficit in subsidiaries 5,887,042 - - - (5,887,042 ) - Total current liabilities 5,887,042 52,611,641 5,887,072 3 (11,774,084 ) 52,611,674 Non-current liabilities: Amount due to related parties-non current - 8,581,743 - - - 8,581,743 Accrued liabilities, non-current - 5,391,664 2,682,248 - - 8,073,912 Lease liabilities, non-current - 300,974 - - - 300,974 Total non-current liabilities - 14,274,381 2,682,248 - - 16,956,629 TOTAL LIABILITIES 5,887,042 66,886,022 8,569,320 3 (11,774,084 ) 69,568,303 Shareholders’ deficit Ordinary shares 1,106 - - - - 1,106 Additional paid-in capital 75,621,294 75,621,294 - - (75,621,294 ) 75,621,294 Statutory reserve 237,486 237,486 - - (237,486 ) 237,486 Accumulated deficit (78,483,156 ) (78,447,606 ) (5,922,592 ) (2 ) 84,370,200 (78,483,156 ) Accumulated other comprehensive loss (3,262,666 ) (3,263,530 ) 866 - 3,262,664 (3,262,666 ) XIAO-I CORPORATION shareholders’ deficit (5,885,936 ) (5,852,356 ) (5,921,726 ) (2 ) 11,774,084 (5,885,936 ) Non-controlling interests (3,098,223 ) - (3,098,223 ) Total shareholders’ deficit (5,885,936 ) (8,950,579 ) (5,921,726 ) (2 ) 11,774,084 (8,984,159 ) TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 1,106 57,935,443 2,647,594 1 - 60,584,144 119 For the year ended December 31, 2022 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 48,184,958 - - - 48,184,958 Cost of revenues - (17,379,144 ) - - - (17,379,144 ) Gross profit - 30,805,814 - - - 30,805,814 Operating expenses - (33,941,593 ) - - - (33,941,593 ) Income of VIE and VIE’s subsidiaries absorbed by WFOE - - (5,898,535 ) - 5,898,535 - Share of income in subsidiaries (5,898,535 ) - - - 5,898,535 - Total operating expenses (5,898,535 ) (33,941,593 ) (5,898,535 ) - 11,797,070 (33,941,593 ) Loss from operations (5,898,535 ) (3,135,779 ) (5,898,535 ) - 11,797,070 (3,135,779 ) Other loss - (2,173,328 ) (35,550 ) (2 ) - (2,208,880 ) Income tax expenses - (660,655 ) - - - (660,655 ) Net loss (5,898,535 ) (5,969,762 ) (5,934,085 ) (2 ) 11,797,070 (6,005,314 ) Net loss attributable to non-controlling interests - (106,779 ) - - - (106,779 ) Net loss attributable to XIAO-I CORPORATION shareholders (5,898,535 ) (5,898,535 ) (5,934,085 ) (2 ) 11,797,070 (5,898,535 ) For the year ended December 31, 2022 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash used in operating activities (1 ) (10,923,345 ) - - - (10,923,346 ) Net cash used in investing activities - (107,122 ) (2,749,294 ) - - (2,856,416 ) Net cash provided by financing activities - 10,757,306 2,749,294 - - 13,506,600 Effect of exchange rate changes - (12,435 ) (4 ) - - (12,439 ) Net change in cash, cash equivalents and restricted cash (1 ) (285,596 ) - (4 ) - (285,601 ) Cash, cash equivalents and restricted cash, at beginning of year 1,105 1,310,737 - 4 - 1,311,846 Cash, cash equivalents and restricted cash, at end of year 1,104 1,025,141 - - - 1,026,245 120 As of December 31, 2023 Condensed Consolidating Schedule of Financial Position Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Assets Current assets: Cash and cash equivalents 1,889 890,365 9,145 663,143 - 1,564,542 Restricted cash - 20,676 - - - 20,676 Accounts receivable, net - 28,326,985 - - - 28,326,985 Inventories - 67,826 - - - 67,826 Contract costs - 1,691,293 - - - 1,691,293 Advance to suppliers - 1,134,529 15,113 - - 1,149,642 Prepaid expenses and other current assets, net 2,493,301 1,665,653 24,632,707 17,983,479 (41,541,587 ) 5,233,553 Amount due from intercompany-current 17,656,465 748,183 - - (18,404,648 ) - Total current assets 20,151,655 34,545,510 24,656,965 18,646,622 (59,946,235 ) 38,054,517 Non-current assets: Property and equipment, net - 1,913,693 211,936 - - 2,125,629 Intangible assets, net - 212,445 - - - 212,445 Long-term investment - 964,250 1,686,209 - (1 ) 2,650,458 Investment in subsidiaries - - - 23,163,931 (23,163,931 ) - Right of use assets - 173,879 2,257,596 - - 2,431,475 Prepaid expenses and other non-current assets - 3,710,351 290,007 - 2,999,999 7,000,357 Amount due from related parties-non current - 13,859,350 15,582 - (15,582 ) 13,859,350 Total non-current assets - 20,833,968 4,461,330 23,163,931 (20,179,515 ) 28,279,714 - TOTAL ASSETS 20,151,655 55,379,478 29,118,295 41,810,553 (80,125,750 ) 66,334,231 Liabilities Current liabilities: Short-term borrowings - 26,760,940 - - - 26,760,940 Accounts payable 34,277 13,210,566 101,495 328,000 1 13,674,339 Amount due to related parties-current - 704,947 - - - 704,947 Deferred revenue - 1,654,145 - - - 1,654,145 Accrued expenses and other current liabilities 347,014 13,295,209 27,160 33,456,901 (33,188,031 ) 13,938,253 Lease liabilities, current - 93,284 836,470 - 1 929,755 Deficit of VIE and VIE’s subsidiaries absorbed by WFOE - - 36,321,088 - (36,321,088 ) - Investment deficit in subsidiaries 24,469,459 - - - (24,469,459 ) - Amount due to intercompany-current 164,593 26,864,085 - - (27,028,678 ) - Total current liabilities 25,015,343 82,583,176 37,286,213 33,784,901 (121,007,254 ) 57,662,379 Non-current liabilities: Amount due to related parties-non current - 7,505,290 - 400,000 - 7,905,290 Accrued liabilities, non-current - 5,153,803 - - 2,605,671 ) 7,759,474 Amount due to intercompany, non-current - - 2,605,671 (2,605,671 ) - Lease liabilities, non-current - 61,471 1,412,480 - (1 ) 1,473,950 Total non-current liabilities - 12,720,564 4,018,151 400,000 (1 ) 17,138,714 TOTAL LIABILITIES 25,015,343 95,303,740 41,304,364 34,184,901 (121,007,255 ) 74,801,093 Shareholders’ deficit Ordinary shares 1,201 - - - - 1,201 Preferred shares 185 - - - - 185 Additional paid-in capital 108,729,047 73,978,700 24,459,360 20,350,000 (118,788,060 ) 108,729,047 Statutory reserve 237,486 237,486 - - (237,486 ) 237,486 Accumulated deficit (110,833,045 ) (107,821,825 ) (36,648,068 ) (12,724,348 ) 157,194,241 (110,833,045 ) Accumulated other comprehensive loss (2,998,562 ) (2,715,449 ) 2,639 - 2,712,810 (2,998,562 ) XIAO-I CORPORATION shareholders’ deficit (4,863,688 ) (36,321,088 ) (12,186,069 ) 7,625,652 40,881,505 (4,863,688 ) Non-controlling interests - (3,603,174 ) - - - (3,603,174 ) Total shareholders’ deficit (4,863,688 ) (39,924,262 ) (12,186,069 ) 7,625,652 40,881,505 (8,466,862 ) TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 20,151,655 55,379,478 29,118,295 41,810,553 (80,125,750 ) 66,334,231 121 For the year ended December 31, 2023 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 59,165,259 - - - 59,165,259 Cost of revenues - (19,741,689 ) - - - (19,741,689 ) Gross profit - 39,423,570 - - - 39,423,570 Operating expenses (2,307,368 ) (58,274,909 ) (221,950 ) (541,525 ) - (61,345,752 ) Income of VIE and VIE’s subsidiaries absorbed by WFOE - - (23,486,141 ) - 23,486,141 - Share of income in subsidiaries (24,315,847 ) - - (23,777,571 ) 48,093,418 - Total operating expenses (26,623,215 ) (58,274,909 ) (23,708,091 ) (24,319,096 ) 71,579,559 (61,345,752 ) Income from operations (26,623,215 ) (18,851,339 ) (23,708,091 ) (24,319,096 ) 71,579,559 (21,922,182 ) Other loss 161,408 (1,391,071 ) (69,480 ) 3,249 - (1,295,894 ) Income tax expenses - (3,787,692 ) - - - (3,787,692 ) Net income (26,461,807 ) (24,030,102 ) (23,777,571 ) (24,315,847 ) 71,579,559 (27,005,768 ) Net loss attributable to non-controlling interests - (543,961 ) - - - (543,961 ) Net income attributable to XIAO-I CORPORATION shareholders (23,486,141 ) (23,486,141 ) (23,777,571 ) (24,315,847 ) 71,579,559 (23,486,141 ) For the year ended December 31, 2023 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash (used in) provided by operating activities (21,749,842 ) 15,185,225 (24,233,134 ) 15,263,143 (254,890 ) (15,789,498 ) Net cash used in investing activities (13,000,000 ) (16,842,456 ) (217,358 ) (35,350,000 ) 45,350,000 (20,059,814 ) Net cash provided by financing activities 34,750,627 1,322,448 24,459,360 20,750,000 (44,809,360 ) 36,473,075 Effect of exchange rate changes - 200,007 277 - (285,750 ) (85,466 ) Net change in cash, cash equivalents and restricted cash 785 (134,776 ) 9,145 663,143 - 538,297 Cash, cash equivalents and restricted cash, at beginning of year 1,104 1,025,141 - - - 1,026,245 Cash, cash equivalents and restricted cash, at end of year 1,889 890,365 9,145 663,143 - 1,564,542 For the years ended December 31, 2021, 2022 and 2023, the cash flows that have occurred between the Company, the VIE and its consolidated subsidiaries, WFOE which is the primary beneficiary of the VIE, and other subsidiaries are summarized as the following: For the years ended December 31, 2021 2022 2023 Cash paid by Xiao-I Corporation to other subsidiaries $ - $ - $ 27,897,826 Cash transfer from other subsidiaries to WFOE - - 25,000,000 Cash transfer from WFOE to VIE and its consolidated subsidiaries - - 24,504,585 Cash transfer from VIE and its consolidated subsidiaries to WFOE - - 640,150 Cash transfer from VIE and its consolidated subsidiaries to other subsidiaries - - 740,000 Cash transfer from WFOE to other subsidiaries - - 576,205 Cash transfer from other subsidiaries to Xiao-I Corporation $ - $ - $ 453,800 122 From January 1, 2024 to the date of this annual report, cash was transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated subsidiaries, in the following manners: (i) the Company provided a total of US$0.15 million in cash to its other subsidiaries while other subsidiaries transferred US$0.32 million to the Company; (ii) WFOE provided a total of US$0.07 million to VIE and its subsidiaries while VIE and its subsidiaries transferred US$0.14 million to WFOE; (iii) WFOE and VIE and its subsidiaries transferred US$0.05 million and US$0.36 million to other subsidiaries, respectively.
The following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents of the PRC operating entities, which were included in the Company’s consolidated balance sheets and statements of comprehensive income/(loss) and statements of cash flows with intercompany transactions eliminated: For the year ended December 31, 2022 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 48,184,958 - - - 48,184,958 Cost of revenues - (17,379,144 ) - - - (17,379,144 ) Gross profit - 30,805,814 - - - 30,805,814 Operating expenses - (33,941,593 ) - - - (33,941,593 ) Income of VIE and VIE’s subsidiaries absorbed by WFOE - - (5,898,535 ) - 5,898,535 - Share of income in subsidiaries (5,898,535 ) - - - 5,898,535 - Total operating expenses (5,898,535 ) (33,941,593 ) (5,898,535 ) - 11,797,070 (33,941,593 ) Loss from operations (5,898,535 ) (3,135,779 ) (5,898,535 ) - 11,797,070 (3,135,779 ) Other loss - (2,173,328 ) (35,550 ) (2 ) - (2,208,880 ) Income tax expenses - (660,655 ) - - - (660,655 ) Net loss (5,898,535 ) (5,969,762 ) (5,934,085 ) (2 ) 11,797,070 (6,005,314 ) Net loss attributable to non-controlling interests - (106,779 ) - - - (106,779 ) Net loss attributable to XIAO-I CORPORATION shareholders (5,898,535 ) (5,898,535 ) (5,934,085 ) (2 ) 11,797,070 (5,898,535 ) For the year ended December 31, 2022 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash used in operating activities (1 ) (10,923,345 ) - - - (10,923,346 ) Net cash used in investing activities - (107,122 ) (2,749,294 ) - - (2,856,416 ) Net cash provided by financing activities - 10,757,306 2,749,294 - - 13,506,600 Effect of exchange rate changes - (12,435 ) (4 ) - - (12,439 ) Net change in cash, cash equivalents and restricted cash (1 ) (285,596 ) - (4 ) - (285,601 ) Cash, cash equivalents and restricted cash, at beginning of year 1,105 1,310,737 - 4 - 1,311,846 Cash, cash equivalents and restricted cash, at end of year 1,104 1,025,141 - - - 1,026,245 103 As of December 31, 2023 Condensed Consolidating Schedule of Financial Position Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Assets Current assets: Cash and cash equivalents 1,889 890,365 9,145 663,143 - 1,564,542 Restricted cash - 20,676 - - - 20,676 Accounts receivable, net - 28,326,985 - - - 28,326,985 Inventories - 67,826 - - - 67,826 Contract costs - 1,691,293 - - - 1,691,293 Advance to suppliers - 1,134,529 15,113 - - 1,149,642 Prepaid expenses and other current assets, net 2,493,301 1,665,653 24,632,707 17,983,479 (41,541,587 ) 5,233,553 Amount due from intercompany-current 17,656,465 748,183 - - (18,404,648 ) - Total current assets 20,151,655 34,545,510 24,656,965 18,646,622 (59,946,235 ) 38,054,517 Non-current assets: Property and equipment, net - 1,913,693 211,936 - - 2,125,629 Intangible assets, net - 212,445 - - - 212,445 Long-term investment - 964,250 1,686,209 - (1 ) 2,650,458 Investment in subsidiaries - - - 23,163,931 (23,163,931 ) - Right of use assets - 173,879 2,257,596 - - 2,431,475 Prepaid expenses and other non-current assets - 3,710,351 290,007 - 2,999,999 7,000,357 Amount due from related parties-non current - 13,859,350 15,582 - (15,582 ) 13,859,350 Total non-current assets - 20,833,968 4,461,330 23,163,931 (20,179,515 ) 28,279,714 - TOTAL ASSETS 20,151,655 55,379,478 29,118,295 41,810,553 (80,125,750 ) 66,334,231 Liabilities Current liabilities: Short-term borrowings - 26,760,940 - - - 26,760,940 Accounts payable 34,277 13,210,566 101,495 328,000 1 13,674,339 Amount due to related parties-current - 704,947 - - - 704,947 Deferred revenue - 1,654,145 - - - 1,654,145 Accrued expenses and other current liabilities 347,014 13,295,209 27,160 33,456,901 (33,188,031 ) 13,938,253 Lease liabilities, current - 93,284 836,470 - 1 929,755 Deficit of VIE and VIE’s subsidiaries absorbed by WFOE - - 36,321,088 - (36,321,088 ) - Investment deficit in subsidiaries 24,469,459 - - - (24,469,459 ) - Amount due to intercompany-current 164,593 26,864,085 - - (27,028,678 ) - Total current liabilities 25,015,343 82,583,176 37,286,213 33,784,901 (121,007,254 ) 57,662,379 Non-current liabilities: Amount due to related parties-non current - 7,505,290 - 400,000 - 7,905,290 Accrued liabilities, non-current - 5,153,803 - - 2,605,671 ) 7,759,474 Amount due to intercompany, non-current - - 2,605,671 (2,605,671 ) - Lease liabilities, non-current - 61,471 1,412,480 - (1 ) 1,473,950 Total non-current liabilities - 12,720,564 4,018,151 400,000 (1 ) 17,138,714 TOTAL LIABILITIES 25,015,343 95,303,740 41,304,364 34,184,901 (121,007,255 ) 74,801,093 Shareholders’ deficit Ordinary shares 1,201 - - - - 1,201 Preferred shares 185 - - - - 185 Additional paid-in capital 108,729,047 73,978,700 24,459,360 20,350,000 (118,788,060 ) 108,729,047 Statutory reserve 237,486 237,486 - - (237,486 ) 237,486 Accumulated deficit (110,833,045 ) (107,821,825 ) (36,648,068 ) (12,724,348 ) 157,194,241 (110,833,045 ) Accumulated other comprehensive loss (2,998,562 ) (2,715,449 ) 2,639 - 2,712,810 (2,998,562 ) XIAO-I CORPORATION shareholders’ deficit (4,863,688 ) (36,321,088 ) (12,186,069 ) 7,625,652 40,881,505 (4,863,688 ) Non-controlling interests - (3,603,174 ) - - - (3,603,174 ) Total shareholders’ deficit (4,863,688 ) (39,924,262 ) (12,186,069 ) 7,625,652 40,881,505 (8,466,862 ) TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 20,151,655 55,379,478 29,118,295 41,810,553 (80,125,750 ) 66,334,231 104 For the year ended December 31, 2023 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 59,165,259 - - - 59,165,259 Cost of revenues - (19,741,689 ) - - - (19,741,689 ) Gross profit - 39,423,570 - - - 39,423,570 Operating expenses (2,307,368 ) (58,274,909 ) (221,950 ) (541,525 ) - (61,345,752 ) Income of VIE and VIE’s subsidiaries absorbed by WFOE - - (23,486,141 ) - 23,486,141 - Share of income in subsidiaries (24,315,847 ) - - (23,777,571 ) 48,093,418 - Total operating expenses (26,623,215 ) (58,274,909 ) (23,708,091 ) (24,319,096 ) 71,579,559 (61,345,752 ) Income from operations (26,623,215 ) (18,851,339 ) (23,708,091 ) (24,319,096 ) 71,579,559 (21,922,182 ) Other loss 161,408 (1,391,071 ) (69,480 ) 3,249 - (1,295,894 ) Income tax expenses - (3,787,692 ) - - - (3,787,692 ) Net income (26,461,807 ) (24,030,102 ) (23,777,571 ) (24,315,847 ) 71,579,559 (27,005,768 ) Net loss attributable to non-controlling interests - (543,961 ) - - - (543,961 ) Net income attributable to XIAO-I CORPORATION shareholders (23,486,141 ) (23,486,141 ) (23,777,571 ) (24,315,847 ) 71,579,559 (23,486,141 ) For the year ended December 31, 2023 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash (used in) provided by operating activities (21,749,842 ) 15,185,225 (24,233,134 ) 15,263,143 (254,890 ) (15,789,498 ) Net cash used in investing activities (13,000,000 ) (16,842,456 ) (217,358 ) (35,350,000 ) 45,350,000 (20,059,814 ) Net cash provided by financing activities 34,750,627 1,322,448 24,459,360 20,750,000 (44,809,360 ) 36,473,075 Effect of exchange rate changes - 200,007 277 - (285,750 ) (85,466 ) Net change in cash, cash equivalents and restricted cash 785 (134,776 ) 9,145 663,143 - 538,297 Cash, cash equivalents and restricted cash, at beginning of year 1,104 1,025,141 - - - 1,026,245 Cash, cash equivalents and restricted cash, at end of year 1,889 890,365 9,145 663,143 - 1,564,542 105 As of December 31, 2024 Condensed Consolidating Schedule of Financial Position Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Assets Current assets: Cash and cash equivalents 2,442 566,544 7,802 269,805 - 846,593 Accounts receivable, net - 55,522,880 - 20,137 - 55,543,017 Amounts due from related parties - 13,587,536 - - - 13,587,536 Inventories - 10,724 3,638 - - 14,362 Contract costs - 2,357,950 - 150,000 (5,272 ) 2,502,678 Advance to suppliers - 3,205,098 - - - 3,205,098 Prepaid expenses and other current assets, net 49,049 413,579 225,104 105,000 - 792,732 Amount due from intercompany-current 32,055,968 2,063,000 27,495,150 3,566,962 (65,181,080 ) - Total current assets 32,107,459 77,727,311 27,731,694 4,111,904 (65,186,352 ) 76,492,016 Non-current assets: Property and equipment, net - 1,777,249 90,487 - - 1,867,736 Intangible assets, net - 140,366 3,004 - - 143,370 Long-term investment - 937,909 1,559,685 - - 2,497,594 Investment in subsidiaries - - 16,672,470 (16,672,470 ) - Right of use assets - 66,913 766,117 - - 833,030 Prepaid expenses and other non-current assets - 3,558,515 119,213 - - 3,677,728 Amount due from related parties-non current - - - - - - Total non-current assets - 6,480,952 2,538,506 16,672,470 (16,672,470 ) 9,019,458 TOTAL ASSETS 32,107,459 84,208,263 30,270,200 20,784,374 (81,858,822 ) 85,511,474 Liabilities Current liabilities: Short-term borrowings - 32,879,865 - - - 32,879,865 Accounts payable 38,412 26,740,606 32,421 320,000 - 27,131,439 Amount due to related parties-current - 67,068 - 150,000 - 217,068 Deferred revenue - 2,385,228 - - - 2,385,228 Convertible loans 216,756 - - - - 216,756 Accrued expenses and other current liabilities 335,563 22,173,896 741,023 624,560 (585,589 ) 23,289,453 Lease liabilities, current - 57,545 426,113 - - 483,658 Deficit of VIE and VIE’s subsidiaries absorbed by WFOE - - 39,456,318 - (39,456,318 ) - Investment deficit in subsidiaries 43,544,549 - - - (43,544,549 ) - Amount due to intercompany-current 174,593 31,080,404 171,403 33,177,069 (64,603,469 ) - Total current liabilities 44,309,873 115,384,612 40,827,278 34,271,629 (148,189,925 ) 86,603,467 Non-current liabilities: Amount due to related parties-non current - 7,336,833 - - - 7,336,833 Accrued liabilities, non-current - 4,508,695 2,534,490 - - 7,043,185 Lease liabilities, non-current - - 295,962 - - 295,962 Total non-current liabilities - 11,845,528 2,830,452 - - 14,675,980 TOTAL LIABILITIES 44,309,873 127,230,140 43,657,730 34,271,629 (148,189,925 ) 101,279,447 Shareholders’ deficit Ordinary shares 1,598 - - - - 1,598 Preferred shares 185 - - - - 185 Additional paid-in capital 115,745,140 73,978,700 29,225,626 240,000 (103,444,326 ) 115,745,140 Statutory reserve 237,486 237,486 - - (237,486 ) 237,486 Accumulated deficit (125,338,509 ) (112,035,976 ) (41,987,769 ) (13,727,255 ) 167,751,000 (125,338,509 ) Accumulated other comprehensive loss (2,848,314 ) (1,636,528 ) (625,387 ) - 2,261,915 (2,848,314 ) XIAO-I CORPORATION shareholders’ deficit (12,202,414 ) (39,456,318 ) (13,387,530 ) (13,487,255 ) 66,331,103 (12,202,414 ) Non-controlling interests - (3,565,559 ) - - - (3,565,559 ) Total shareholders’ deficit (12,202,414 ) (43,021,877 ) (13,387,530 ) (13,487,255 ) 66,331,103 (15,767,973 ) TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 32,107,459 84,208,263 30,270,200 20,784,374 (81,858,822 ) 85,511,474 106 For the year ended December 31, 2024 Condensed Consolidating Schedule of Results of Operations Parent VIE and its consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net revenues - 71,030,671 1,311,056 3,111,639 (5,139,051 ) 70,314,315 Cost of revenues - (22,261,142 ) (79,267 ) (2,454,526 ) 2,530,167 (22,264,768 ) Gross profit - 48,769,529 1,231,789 657,113 (2,608,884 ) 48,049,547 Operating expenses (8,381,108 ) (51,453,460 ) (3,254,279 ) (453,846 ) 2,622,112 (60,920,581 ) Loss of VIE and VIE’s subsidiaries absorbed by WFOE - - (4,214,151 ) - 4,214,151 - Share of loss in subsidiaries (6,225,339 ) - - (6,418,622 ) 12,643,961 - Total operating expenses (14,606,447 ) (51,453,460 ) (7,468,430 ) (6,872,468 ) 19,480,224 (60,920,581 ) Loss from operations (14,606,447 ) (2,683,931 ) (6,236,641 ) (6,215,355 ) 16,871,340 (12,871,034 ) Other income/(loss) 100,983 (1,576,084 ) (181,981 ) (4,711 ) (18,501 ) (1,680,294 ) Income tax expenses - - - - - - Net loss (14,505,464 ) (4,260,015 ) (6,418,622 ) (6,220,066 ) 16,852,839 (14,551,328 ) Net loss attributable to non-controlling interests - (45,864 ) - - - (45,864 ) Net loss attributable to XIAO-I CORPORATION shareholders (14,505,464 ) (4,214,151 ) (6,418,622 ) (6,220,066 ) 16,852,839 (14,505,464 ) 107 For the year ended December 31, 2024 Condensed Consolidating Schedule of Cash Flows Parent VIEs and their consolidated subsidiaries WFOE Other Subsidiaries Elimination Adjustments Consolidated Total (in U.S. dollars) Net cash (used in) provided by operating activities (5,476,392 ) (10,504,500 ) (4,101,611 ) 14,697,338 (9,753,084 ) (15,138,249 ) Net cash (used in) provided by investing activities - (465,451 ) (3,120 ) 5,290,000 (5,290,000 ) (468,571 ) Net cash provided by (used in) financing activities 5,476,945 10,612,756 4,766,266 (20,360,000 ) 15,343,734 15,839,701 Effect of exchange rate changes - 12,698 (662,878 ) - (300,650 ) (950,830 ) Net change in cash, cash equivalents and restricted cash 553 (344,497 ) (1,343 ) (372,662 ) - (717,949 ) Cash, cash equivalents and restricted cash, at beginning of year 1,889 911,041 9,145 642,467 - 1,564,542 Cash, cash equivalents and restricted cash, at end of year 2,442 566,544 7,802 269,805 - 846,593 For the years ended December 31, 2022, 2023 and 2024, the cash flows that have occurred between the Company, the VIE and its consolidated subsidiaries, WFOE which is the primary beneficiary of the VIE, and other subsidiaries are summarized as the following: For the years ended December 31, 2022 2023 2024 Cash paid by Xiao-I Corporation to other subsidiaries $ - $ 27,897,826 $ 5,427,500 Cash transfer from other subsidiaries to WFOE - 25,000,000 4,820,000 Cash transfer from WFOE to VIE and its consolidated subsidiaries - 24,504,585 4,936,837 Cash transfer from VIE and its consolidated subsidiaries to WFOE - 640,150 651,188 Cash transfer from VIE and its consolidated subsidiaries to other subsidiaries - 740,000 935,400 Cash transfer from WFOE to other subsidiaries - 576,205 - Cash transfer from other subsidiaries to Xiao-I Corporation $ - $ 453,800 $ 1,596,500 108 From January 1, 2025 to the date of this annual report, cash was transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated subsidiaries, in the following manners: (i) the Company provided a total of US$3.60 million in cash to its other subsidiaries while other subsidiaries transferred US$0.17 million to the Company; (ii) WFOE provided a total of US$3.32 million to VIE and its subsidiaries while VIE and its subsidiaries transferred US$0.45 million to WFOE; (iii) WFOE and VIE and its subsidiaries transferred nil and US$0.12 million to other subsidiaries, respectively; and (iv) other subsidiaries transferred US$3.00 million to WFOE.
Significant transactions with related parties For the years ended December 31, Nature 2021 2022 2023 Software and service income Zhejiang Baiqianyin $ 286,875 $ - $ - Technology service fee payable - Shanghai Shenghan $ 465,058 $ - $ - Zhizhen Guorui - 100,315 661,010 Technology service fee paid Shanghai Shenghan $ - $ - $ 112,980 Zhizhen Guorui 684,412 Loans from related parties Hui Yuan $ - $ - $ 400,000 Interest-free loans from related parties Zhejiang Baiqianyin $ 5,782,216 $ 1,783,326 $ 290,076 Hui Yuan 9,696,450 532,026 - Haiyin Capital Investment (International) Limited 126,744 - - Jiaxing Chiyu Investment Partnership (limited Partnership) 775,097 - - Tianjin Haiyin 310,038 - - Weng Wei 74,409 - - Interest-free loans repayment to related parties Zhejiang Baiqianyin $ 5,470,627 $ 1,788,230 $ 141 Jiaxing Chiyu Investment Partnership (limited Partnership) - 297,221 - Hui Yuan 899,111 169,416 1,355,760 Jiaxing Sound Core Intelligent Technology Co., LTD - 59,444 31,776 Shanghai Shenghan 139,517 - - Weng Wei 74,409 - - Tianjin Haiyin 310,038 - - Return of inventories to a related party Shanghai Shenghan $ - $ 239,330 $ - Interest-free loans to a related party Zhizhen Guorui $ - $ - $ 13,896,539 Debt relief Shanghai Machinemind Intelligent Technology Co., Ltd. $ - $ 72,819 $ - 126 Arrangements with Our Executive Officers and Directors Agreements with Our Non-Executive Directors We have entered into an independent director agreement with one of our non-executive directors.
Significant transactions with related parties For the years ended December 31, Nature 2022 2023 2024 Technology service fee payable Zhizhen Guorui $ 100,315 $ 661,010 $ 699,404 Shanghai Shenghan - - 7,991 Technology service fee paid Zhizhen Guorui $ - $ 684,412 $ 878,512 Shanghai Shenghan - 112,980 21,888 Loans from a related party Hui Yuan $ - $ 400,000 $ - Repayment of loans from a related party Hui Yuan $ - $ - $ 812,747 Interest-free loans from related parties Zhejiang Baiqianyin $ 1,783,326 $ 290,076 $ - Hui Yuan 532,026 - 150,000 Interest-free loans repayment to related parties Jiaxing Chiyu Investment Partnership (limited Partnership) $ 297,221 $ - $ 416,916 Hui Yuan 169,416 1,355,760 - Jiaxing Sound Core Intelligent Technology Co., LTD 59,444 31,776 - Zhejiang Baiqianyin 1,788,230 141 - Return of inventories to a related party Shanghai Shenghan $ 239,330 $ - $ - Interest-free loans to a related party Zhizhen Guorui $ - $ 13,896,539 $ - Debt relief Shanghai Machinemind Intelligent Technology Co., Ltd. $ 72,819 $ - $ - 112 Arrangements with Our Executive Officers and Directors Agreements with Our Non-Executive Directors We have entered into an independent director agreement with one of our non-executive directors.
As a result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their net assets to the Company. 123 Moreover, the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations.
Moreover, the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations.
An entity which the Group holds 18% equity interests 124 Amounts due from related parties Amounts due from related parties consisted of the following for the periods indicated: As of December 31, 2022 2023 Due from related parties-current $ $ Accounts receivable Zhejiang Baiqianyin (a) 48,860 - Other receivables Zhejiang Baiqianyin (b) 297,657 - Shanghai Aoshu (c) 20,377 19,796 Credit losses provisions (20,377 ) (19,796 ) Subtotal-due from related parties-current 346,517 - Due from related parties-non current Other receivables Zhizhen Guorui (d) $ - $ 13,859,350 Subtotal-due from related parties-non current - 13,859,350 Total $ 346,517 $ 13,859,350 (a).
An entity which the Group holds 18% equity interests 110 Amounts due from related parties Amounts due from related parties consisted of the following for the periods indicated: As of December 31, 2023 2024 Due from related parties-current Other receivables Zhizhen Guorui (a) $ - $ 13,587,536 Shanghai Aoshu (b) 19,796 19,255 Credit losses provisions (19,796 ) (19,255 ) Subtotal-due from related parties-current - 13,587,536 Due from related parties-non current Other receivables Zhizhen Guorui $ 13,859,350 $ - Subtotal-due from related parties-non current 13,859,350 - Total $ 13,859,350 $ 13,587,536 (a).
The Issuance is subject to the Subscription Agreement, between Xiao-I and ZunTian dated December 13, 2023, which was subsequently amended on April 4, 2024, to clarify that the Preferred Shares shall not confer any other rights, including, without limitation, dividend or liquidation rights or any other financial or economic rights. 117 Consolidation Xiao-I conducts substantially all of its business in China through Shanghai Xiao-i, the VIE, due to PRC legal restrictions of foreign ownership in certain sectors.
The Issuance is subject to the Subscription Agreement, between Xiao-I and ZunTian dated December 13, 2023, which was subsequently amended on April 4, 2024, to clarify that the Preferred Shares shall not confer any other rights, including, without limitation, dividend or liquidation rights or any other financial or economic rights.
The registered address of iTeam Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
The registered address of ZunTian Holding Limited is Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands.
Amounts due to related parties Amount due to related parties consisted of the following for the periods indicated: As of December 31, 2022 2023 Due to related parties-current Accounts payable Shanghai Shenghan $ 201,465 $ 83,036 Shanghai Machinemind Intelligent Technology Co., Ltd. - - Jiaxing Sound Core Intelligent Technology Co., LTD 32,622 - Zhizhen Guorui 97,868 71,735 Interest-free loans (d) Jiaxing Chiyu Investment Partnership (limited Partnership) $ 434,959 $ 422,541 Haiyin Capital Investment (International) Limited 129,517 127,635 Subtotal-due to related parties-current 896,431 704,947 Due to related parties-non current Hui Yuan(e) $ 8,581,743 $ 7,905,290 Subtotal-due to related parties-non current 8,581,743 7,905,290 Total $ 9,478,174 $ 8,610,237 125 (d) The balance represents the advance funds from related parties for daily operational purposes.
For the year ended December 31, 2022, 2023 and 2024, the Group made full provision of receivables from Shanghai Aoshu; Amounts due to related parties Amount due to related parties consisted of the following for the periods indicated: As of December 31, 2023 2024 Due to related parties-current Accounts payable Shanghai Shenghan $ 83,036 $ 67,068 Zhizhen Guorui 71,735 - Interest-free loans (c) Hui Yuan - 150,000 Haiyin Capital Investment (International) Limited $ 127,635 $ - Jiaxing Chiyu Investment Partnership (limited Partnership) 422,541 - Subtotal-due to related parties-current 704,947 217,068 Due to related parties-non current Hui Yuan(d) $ 7,905,290 $ 7,336,833 Subtotal-due to related parties-non current 7,905,290 7,336,833 Total $ 8,610,237 $ 7,553,901 111 (c) The balance represents the advance funds from related parties for daily operational purposes.
Substantially all of Xiao-I’s revenues, costs and net income in China are directly or indirectly generated through the VIE.
Consolidation Xiao-I conducts substantially all of its business in China through Shanghai Xiao-I, the VIE, due to PRC legal restrictions of foreign ownership in certain sectors. Substantially all of Xiao-I’s revenues, costs and net income in China are directly or indirectly generated through the VIE.
For the year ended December 31, 2022, the Group made full provision of receivables from Shanghai Aoshu; (d). On March 31, 2023, the Group entered into agreement to provide a loan to Zhizhen Guorui, an equity investment of the Group, with a maximum amount of $14,084,705 (RMB100.0 million) and interest-free.
The balance consisted of: (i) On March 31, 2023, the Group entered into agreement to provide a loan to Zhizhen Guorui, an equity investment of the Group, with a maximum amount of $14,084,705 (RMB100.0 million) and interest-free. As of December 31, 2024, the actual loan provided by the Group to Zhizhen Guorui amounted to $13,480,745 (RMB98.4 million).
The registered address of ZunTian Holding Limited is Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands. On December 13, 2023, Xiao-I issued 3,700,000 preferred shares, each with a par value of US$0.00005 and carrying a voting right equivalent to 20 votes (the “3.7 million Preferred Shares” or the “Preferred Shares”) to ZunTian Holding Limited.
On December 13, 2023, Xiao-I issued 3,700,000 preferred shares, each with a par value of US$0.00005 and carrying a voting right equivalent to 20 votes (the “3.7 million Preferred Shares” or the “Preferred Shares”) to ZunTian Holding Limited. 99 As of the date of this annual report, none of our outstanding ordinary shares were held by record holders in the United States.
Ordinary Shares Beneficially Owned Number Percent Directors and Executive Officers: Hui Yuan (1) 3,272,633 13.62 % Wei Weng (2) 10,000 * All directors and executive officers as a group (2 individuals): 3,282,633 13.65 % Other ≥ 5% Beneficial Owners ZunTian Holding Limited (3) 1,969,546 8.20 % PP Smart Holding Limited (4) 1,668,542 6.95 % River Hill China Fund L.P (5) 1,458,532 6.07 % Grand Glory (Hong Kong) Corporation Limited (6) 1,444,752 6.02 % iTeam Holding Limited (7) 1,286,420 5.36 % Shanghai Maocheng Enterprise Management Center (Limited Partnership) (8) 1,203,972 5.01 % * Indicates beneficial ownership of less than 1% of the total outstanding ordinary shares.
Ordinary Shares Beneficially Owned Number Percent Directors and Executive Officers: Hui Yuan(1) 3,272,633 8.75 % Wei Weng(2) 10,000 * All directors and executive officers as a group (2 individuals): 3,282,633 8.78 % Other ≥ 5% Beneficial Owners ZunTian Holding Limited(3) 1,969,546 5.27 % * Indicates beneficial ownership of less than 1% of the total outstanding ordinary shares.
See our corporate legal structure diagram for detailed information. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. B. Related Party Transactions. Contractual Arrangements Xiao-I’s indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd.
See our corporate legal structure diagram for detailed information. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company. B. Related Party Transactions. The VIE Agreements The PRC government regulates the telecommunications and internet industry, including software industry, through strict business licensing requirements and other government regulations.
Related parties The following is a list of related parties which the Group has transactions with: No.
Unless otherwise specified, the equity interests described herein are calculated based on the total number of outstanding ordinary shares of the Company as of December 31, 2024. Related parties The following is a list of related parties which the Group has transactions with: No.
Cash proceeds may flow to Shanghai Xiao-i from WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations.
Cash proceeds may flow to Shanghai Xiao-I from WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-I as permitted by the applicable PRC regulations. 109 Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts due in the ordinary course of business.
Removed
As a result of the Issuance, Mr. Yuan beneficially owns more than 79% of the voting power of Xiao-I. (4) PP Smart Holding Limited is incorporated in British Virgin Islands and is wholly owned and controlled by Zhu Pinpin. The registered address of PP Smart Holding Limited is Sertus Chambers, P.O.
Added
As a result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their net assets to the Company.
Removed
Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. (5) River Hill China Fund L.P. is formed in Cayman Islands and is wholly owned and controlled by Hangzhou Ali Venture Capital Co., Ltd. (a Chinese company), which in return is wholly owned and controlled by Hangzhou Zhenxi Investment Co., Ltd.
Added
The Group anticipates that it will be able to repay the loan within one year. (ii) The prepayment of $106,791 to Zhizhen Guorui for the purchase of technology development service. (b). Other receivable from Shanghai Aoshu was the payment to an employee on behalf of Shanghai Aoshu.
Removed
(a Chinese company), which in return is owned by Hangzhou Zhengqiang Investment Management Partnership (Limited Partnership) (a Chinese company) (“Hangzhou Zhengqiang”) and Hangzhou Zhensheng Investment Management Partnership (Limited Partnership) (a Chinese company) (“Hangzhou Zhensheng”) 50/50.
Added
Not applicable. Item 8. Financial Information. A. Consolidated Statements and Other Financial Information. Please see Item 18. “Financial Statements” for our audited consolidated financial statements filed as part of this annual report. Litigation In the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters.
Removed
Hangzhou Zhengqiang is owned by five individuals (Yong Zhang, Ying Zhao, Junfang Zheng, Xiaofeng Shao, Zeming Wu) with each owning 19.999% and Hangzhou Zhengyue Enterprise Management Co., Ltd. owning 0.0001%. Hangzhou Zhensheng is owned by five individuals (Yong Zhang, Ying Zhao, Junfang Zheng, Xiaofeng Shao, Zeming Wu) owning 19.999% each and Hangzhou Zhengyue Enterprise Management Co., Ltd. owning 0.0001%.
Added
The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. 113 On June 26, 2024, a securities class action was filed in the Supreme Court of the State of New York, County of New York, against Xiao-I Corporation and certain of its officers and directors.
Removed
The registered address of River Hill China Fund L.P. is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. (6) Grand Glory (Hong Kong) Corporation Limited is incorporated in Hong Kong and is wholly owned and controlled by Zhejiang Geely Holding Group Co., Ltd.
Added
Plaintiffs alleged violations of the Securities Act of 1933, asserting that the company’s IPO registration statement and prospectus contained materially misleading statements or omissions related to its AI capabilities and customer contracts. The action seeks unspecified damages and other relief.
Removed
(a Chinese company), which in return is wholly owned and controlled by Zhejiang Geely Holding (Group) Co., Ltd. (a Chinese company), of which Shufu Li, Xingxing Li and Zhejiang Geely Holding (Group) Co., Ltd. own 82.23%, 8.058% and 9.709% respectively.
Added
On September 13, 2024, plaintiffs filed an amended complaint expanding the allegations to include new information from Xiao-I’s subsequent SEC filings, arguing that post-IPO disclosures also failed to correct earlier misstatements. Xiao-I Corporation moved to dismiss the state court case on October 31, 2024, that motion was granted on April 24, 2025.
Removed
The registered address of Grand Glory (Hong Kong) Corporation Limited is Unit 2204, 22/F Lippo Ctr Tower 2, 89 Queensway, Hong Kong. (7) iTeam Holding Limited is incorporated in British Virgin Islands and is owned by our Chairman and CEO, Mr. Yuan who controls 100% of the voting power of iTeam Holding Limited.
Added
Separately, on October 15, 2024, a second securities class action lawsuit was filed in the U.S. District Court for the Southern District of New York alleging violations of both the Securities Act and the Securities Exchange Act of 1934.
Removed
(8) Shanghai Maocheng Enterprise Management Center (Limited Partnership) is formed in Shanghai, China and is owned by Jiaxing Well Known Investment Partnership (limited Partnership) (a Chinese company), with 99% ownership and Zhiwei Zheng with 1%, which in return is owned by Zhiwei Zheng and Lijun Zhong 50/50.
Added
The complaint focuses on similar alleged misrepresentations in the IPO filings and alleges the company failed to disclose material risks about its technology and commercialization prospects. Xiao-I disclosed that it intends to vigorously contest both lawsuits. Xiao-I Corporation submitted pre-motion to dismiss letters on May 7, 2025, and motions to dismiss are due on June 9, 2025.
Removed
The registered address of Shanghai Maocheng Enterprise Management Center (Limited Partnership) is Floor 5, Building 7, No. 3601, Dongfang Road, Pudong New Area, Shanghai, China. 113 As of the date of this annual report, none of our outstanding ordinary shares were held by record holders in the United States.
Added
In addition, Xiao-I remains involved in a long-standing patent litigation with Apple Inc. Xiao-I claims that Apple’s Siri prod-uct infringes on its patented voice assistant technology. On August 3, 2020, Shanghai Xiao-I filed a lawsuit with the High People’s Court of Shanghai in China, against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading (Shanghai) Co., Ltd.
Removed
(“Zhizhen Technology” or “WFOE”) entered into a series of contractual arrangements that establish the VIE structure (the “VIE Agreements”). The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies.
Added
(together, “Apple”), demanding that Apple cease its infringement of Shanghai Xiao-I’s intelligent assistant patent (ZL200410053749.9 invention patent) by its Siri (intelligent assistant) (the “Patent Infringement Case”).
Removed
Xiao-I has evaluated the guidance in FASB ASC 810 and determined that Xiao-I is the primary beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements.
Added
The lawsuit seeks various remedies, including but not limited to, requiring Apple to stop manufacturing, using, offering to sell, selling or importing products that infringe Shanghai Xiao-I’s patent, and a temporary claim amount of 10 billion yuan (RMB). On August 27, 2020, the High People’s Court of Shanghai formally accepted the Patent Infringement Case filed by Shanghai Xiao-I against Apple.
Removed
Through the VIE Agreements, the Company is deemed the primary beneficiary of the VIE for accounting purposes. The VIE has no assets that are collateral for or restricted solely to settle its obligations. The creditors of the VIE do not have recourse to the Company’s general credit. Accordingly, under U.S.
Added
On September 4, 2021, Shanghai Xiao-I filed a behavior preservation application (injunction) with the Shanghai High People’s Court, demanding Apple to immediately stop the patent infringement involving Siri, including but not limited to stopping the production, selling, offering to sell, importing or using of iPhone products that infringe Shanghai Xiao-I’s patent.
Removed
Uncertainties exist as to Xiao-I’s ability to enforce the VIE Agreements, and the VIE Agreements have not been tested in a court of law.
Added
On February 3, 2023, Apple filed a lawsuit against Shanghai Xiao-I with the Shanghai High People’s Court, requesting (i) confirmation that the iPhone SE, iPhone 12, and iPhone 13 series products equipped with Siri (the “products in question”) do not infringe on the patent rights of ZL200410053749.9 invention patent, and (ii) Shanghai Xiao-I to compensate the plaintiff for reasonable expenses, including lawyer fees, notarization fees, etc., totaling RMB 2 million currently.
Removed
The Chinese regulatory authorities could disallow this VIE structure, which would likely result in a material change in the PRC operating entities’ operations and the value of Xiao-I’s ADSs, including that it could cause the value of such securities to significantly decline or become worthless. 114 The VIE Agreements The PRC government regulates the telecommunications and internet industry, including software industry, through strict business licensing requirements and other government regulations.
Added
On January 29, 2024, the Shanghai High Court decided to merge the above two cases for trial, and they are currently under review The Shanghai High Court held two hearings on September 24, 2024 and November 1, 2024. A verdict in the infringement case is pending as of the date of the most recent filing.
Removed
ASC 810 requires a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.
Added
Xiao-I emphasized that protecting its IP portfolio remains a critical strategic priority. On March 27, 2023, the Beijing Intellectual Property Court notified that Apple Computer Trading (Shanghai) Co., Ltd. had filed a patent administrative lawsuit against the defendant China National Intellectual Property Administration and the third person, Shanghai Xiao-I, regarding the 58271 and 58272 Review Decision of Request for Invalidation.
Removed
A VIE is an entity in which a company, through contractual arrangements, is fully and exclusively responsible for the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits of the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all voting rights of the entity, and therefore the company is the primary beneficiary of the entity for accounting purposes.
Added
On June 28, 2024, the Beijing Intellectual Property Court ruled against Apple, confirming the validity of Xiao-I’s Chinese patent. Furthermore, during 2024, Xiao-I is involved in labor disputes in China involving more than 40 former employees who were laid off as part of a workforce optimization initiative.
Removed
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE.
Added
The disputes primarily relate to claims for unpaid wages, social insurance contributions, housing fund payments, and severance compensation. The total amount of claims asserted exceeds RMB 5 million. Out of these disputes, more than 20 disputes are currently pending before local labor arbitration authorities and the rest has been concluded.
Removed
GAAP, the results of the PRC operating entities are consolidated in Xiao-I’s financial statements. However, investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements may not be effective in providing control over Shanghai Xiao-i.
Added
The company is actively engaging with relevant agencies to seek resolution. While management does not currently expect the outcome to have a material adverse effect on its consolidated financial statements, the disputes could adversely affect employee morale, operational efficiency, or public perception.
Removed
In April 2023, the Group collected accounts receivable from Zhejiang Baiqianyin; (b). Other receivable from Zhejiang Baiqianyin consists of the interest-free borrowings for ordinary business. In April 2023, the Group collected other receivables from Zhejiang Baiqianyin; (c). Other receivable from Shanghai Aoshu was the payment to an employee on behalf of Shanghai Aoshu.
Added
In the opinion of management, there were no other pending or threatened claims and litigation as of December 31, 2024 and through the date of this annual report. Dividend Policy In the following discussion of dividend policy, “we,” “us,” or “our” refer to Xiao-I.
Removed
As of December 31, 2023, the actual loan provided by the Group to Zhizhen Guorui amounted to $13,859,350 (RMB98.4 million). The Group considers the repayment of loan to Zhizhen Guorui will be extended to more than one year.
Added
We have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Removed
In December 2023, the Group entered into another loan agreement with Hui Yuan to borrow $400,000 for daily operation with an annual interest rate of 3.45%.
Added
Any future determination related to a dividend policy will be made at the discretion of our board of directors, and subject to Cayman Islands law.
Added
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will be based upon conditions then existing, including our results of operations, financial condition, current and anticipated capital requirements, business prospects, contractual restrictions and other factors our board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Added
B. Significant Changes. No significant change has occurred since the date of the financial statements included in this annual report. 114 Item 9. The Offer and Listing. A. Offer and Listing Details. Our ADSs are traded on the Nasdaq Global Market. B. Plan of Distribution. Not applicable. C. Markets.
Added
Our ADSs are listed on the Nasdaq Global Market under the symbol “AIXI.” D. Selling Shareholders. Not applicable. E. Dilution. Not applicable. F. Expenses of the Issuer. Not applicable.

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