Xiao-I Corp

Xiao-I Corporation operates as a global cognitive artificial intelligence company, primarily conducting its operations in China through a Variable Interest Entity (VIE), Shanghai Xiao-I Robot Technology Co., Ltd., and its subsidiaries. The company's core business model revolves around developing and commercializing cognitive intelligence technologies, particularly those rooted in natural language processing, to provide AI solutions across various industries. Revenue is generated through two main product lines: Model as a Service (MaaS) and non-MaaS, which are delivered via software sales, embedded hardware products, technology development services, maintenance services, and cloud platform subscriptions. The company serves a diverse customer base, including large and medium-sized contact centers, financial institutions, communication operators, government services, industrial manufacturing, and healthcare sectors, with a notable concentration among leading banks and telecom companies in China.

The company's product and service lines are broadly categorized into MaaS and non-MaaS offerings. The MaaS product line encompasses the development, training, optimization, integration, service packaging, API design, local deployments, and subscription of model products, along with customization services. The non-MaaS product line includes needs assessment, solution design, architecture planning, development, configuration, deployment, and implementation of non-model products. Key technologies underpinning these offerings include natural language processing, speech processing, computer vision, machine learning, affective computing, and data intelligence and hyperautomation. These technologies are commercialized through product platforms such as Conversational AI, Knowledge Fusion, Intelligent Voice, Hyperautomation, Data Intelligence, Cloud, Intelligent Construction Support, Vision Analysis, Intelligent Hardware Support, and Metaverse.

In 2025, Xiao-I reported total net revenue of $12,327,684 ¹, a significant decrease from $70,314,315 ² in 2024. The gross profit for 2025 was $5,478,984 ³, resulting in a gross profit margin of 44.4% ⁴, down from 68.3% ⁵ in 2024. The company experienced an operating loss of $101,826,419 ⁶ in 2025, compared to an operating loss of $14,551,328 ⁷ in 2024. Net loss for 2025 was $101,826,419 ⁸, an increase from a net loss of $14,551,328 ⁹ in 2024. Diluted EPS is not explicitly provided in the filing. Net cash used in operating activities for 2025 was $3,688,864 ¹⁰. As of December 31, 2025, cash and cash equivalents stood at $2,436,319 ¹¹. Total debt is not explicitly stated as a single figure, but contractual obligations include short-term bank borrowings of $29,214,396 ¹², long-term bank borrowings of $1,387,082 ¹³, and loans and other payables from related parties and third parties of $14,113,814 ¹⁴.

Comparing 2025 to 2024, net revenue decreased by $57,986,631 ¹⁵, or 82.5% ¹⁶. This decline was primarily driven by a decrease of $36,547,527 ¹⁷ (89.4% ¹⁸) in sales of cloud-platform products and a decrease of $21,958,121 ¹⁹ (91.1% ²⁰) in technology development services. Sales of software products decreased by $1,043,610 ²¹ (68.8% ²²), and sales of hardware products decreased by $827,451 ²³ (59.3% ²⁴). In contrast, maintenance and support services revenue increased by $2,390,078 ²⁵, or 98.8% ²⁶. Gross profit margin declined from 68.3% ²⁷ in 2024 to 44.4% ²⁸ in 2025. Selling expenses decreased by 67.8% ²⁹ from $3,320,886 ³⁰ in 2024 to $1,070,145 ³¹ in 2025. General and administrative expenses increased by 233.7% ³² from $22,940,916 ³³ in 2024 to $76,555,497 ³⁴ in 2025, largely due to non-recurring charges related to strategic realignment. Research and development expenses decreased by 29.4% ³⁵ from $34,658,779 ³⁶ in 2024 to $24,456,422 ³⁷ in 2025.

During 2025, Xiao-I implemented a strategic realignment to address a deteriorating operating environment characterized by increased competition from large integrated cloud platforms and tightening enterprise IT budgets in the PRC. This realignment involved discontinuing or scaling back certain lower-margin product lines and customer engagements, including substantial portions of technology development services, hardware sales, and cloud-platform resale activities. The company also undertook a reduction in headcount and consolidated certain office facilities. Research and development activities were reoriented toward task-specific fine-tuning, lightweight deployment, and commercialization of existing model assets, moving away from foundational model pre-training. In 2024, the company launched AI-powered smart glasses, which drove an 18-fold increase in hardware revenue to $1.40 million ³⁸ in 2024 from $75,363 ³⁹ in 2023, and introduced tAIkbox, an AI-powered customer service solution. The company also completed several capital raising activities in 2024 and early 2025 through the issuance of convertible promissory notes, generating aggregate gross proceeds of approximately $10 million ⁴⁰. Legal proceedings included ongoing patent litigation against Apple Inc., with a favorable ruling in Beijing upholding the validity of a Xiao-I patent, and the conclusion of infringement trial proceedings in Shanghai with a decision pending. The company also addressed Nasdaq listing compliance by implementing a one-for-nine reverse ADS split in August 2024 to regain compliance with the minimum bid price requirement.

Xiao-I intends to keep any future earnings to finance the expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. The company is currently undertaking several remediation plans to meet its cash requirements for the next 12 months from the issuance date of this report. These plans include negotiating extensions for liabilities such as borrowings and loans from third parties, actively seeking new bank financing, and implementing strict cost control and budget enhancements to improve operational efficiency and create resource synergy.

A key growth area for Xiao-I is the continued improvement of its cognitive technology capabilities. The company has established a technology research institute for in-depth communication on technological innovation with experts and scholars from top universities, including Duke University, Hong Kong University of Science and Technology, and Columbia University. It also maintains in-depth cooperative relations with well-known domestic universities such as Tsinghua University, Fudan University, Shanghai Jiaotong University, Beijing University of Posts and Telecommunications, and Peking University to jointly develop cutting-edge technologies.

Another significant growth vector is the further development and creation of long-term sustainable commercialization opportunities through technology innovation, application combination innovation, and AI product diversification. The company's commercialization efforts in intelligent drawing review for the construction industry exemplify this strategy. Xiao-I also aims to strengthen its leading position in metaverse-related products, leveraging its first-mover advantage in virtual human design and production, which began in 2016.

The company plans to expand its customer base by targeting small and medium-sized customers through market segmentation and personalization, moving beyond its existing focus on major customers. Additionally, Xiao-I intends to increase its offerings of integrated software and hardware products, shifting from its primary focus on software sales and services. A strategic goal is to further expand its global footprint, aiming to become a global artificial intelligence enterprise by internationalizing its products and services. With the development of the Hua Zang Large Language Model (LLM), the company is also developing and expanding its business-to-consumer (2C) offerings, anticipating significant changes in application prospects for consumer products due to natural user interactions, improved comprehension and reasoning capabilities, and a wider range of application scenarios.

Operationally, Xiao-I foresees a notable decline in research and development (R&D) expenses as it strategically pivots its focus towards attaining profitability, following the completion of the foundational pre-training phase of Hua Zang LLM in 2023. The reorientation of R&D activities towards task-specific fine-tuning, lightweight deployment, and commercialization-related work is less capital-intensive than foundational training. The strategic realignment implemented in 2025 also involved a reduction in headcount and consolidation of certain office facilities, which are expected to contribute to improved operating efficiency and a reduced overall cost base, with non-recurring charges related to these actions substantially completed by December 31, 2025.

Planned capital allocation includes continued investment in research and development, although with a reoriented focus. The company's ability to obtain additional capital is subject to various uncertainties, including market position, future profitability, general market conditions for capital-raising activities in China, and economic, political, and international conditions. The issuance and sale of additional equity would result in further dilution to shareholders, and incurring indebtedness would lead to increased debt service obligations and potential operating covenants restricting operations or dividend payments.

Management has explicitly flagged several structural headwinds and execution risks to its growth plan. These include the substantial doubt about the company's ability to continue as a going concern due to past net losses and negative operating cash flows, with an accumulated deficit of $226.56 million ⁴¹ as of December 31, 2025. The company's ability to pay dividends and service debt depends on distributions from its PRC subsidiaries, which are subject to PRC regulations and restrictions on currency conversion and profit distribution. Furthermore, the company faces risks related to its reliance on a concentrated group of customers and suppliers, with the largest customer accounting for 31.9% ⁴² of revenue in 2025 and top-three suppliers accounting for 56.1% ⁴³ of total purchases in 2025. The expansion into consumer hardware products, such as AI-powered smart glasses, presents operational risks related to large-scale manufacturing, marketing, distribution, supply chain management, quality assurance, cost control, production capacity, and customer support.

Xiao-I faces several material risks, including macroeconomic, competitive, regulatory, geopolitical, and operational challenges. Macroeconomic conditions in the PRC led to tightening enterprise IT budgets and lengthened customer decision cycles in 2025, increasing return-on-investment scrutiny for AI-related expenditures. The company has experienced net losses in 2023 ($27.01 million ⁴⁴), 2024 ($14.55 million ⁴⁵), and 2025 ($101.82 million ⁴⁶), and negative cash flows from operating activities in 2023 ($15.79 million ⁴⁷), 2024 ($15.14 million ⁴⁸), and 2025 ($3.69 million ⁴⁹), raising substantial doubt about its ability to continue as a going concern. Competitive risks intensified in 2025 due to expanded AI customer-service offerings from large integrated cloud platforms, which often bundled services at significantly lower price points, increasing pricing pressure on independent vendors. The company also faces significant risks related to customer payment ability, having recorded a material increase in its allowance for credit losses in 2024 due to longer payment cycles and collection uncertainties. Regulatory risks include recent U.S. Treasury rules restricting U.S. investments in Chinese AI and technology sectors, effective January 2, 2025, which may adversely impact future U.S.-based investments. Geopolitical tensions between the U.S. and China, including increased tariffs (U.S. to 145% ⁵⁰ and China to 125% ⁵¹ as of February and April 2025, respectively), could adversely affect demand for products, costs, and the overall business environment. Operational risks include reliance on a limited number of suppliers, with the top three suppliers accounting for 56.1% ⁵² of total purchases in 2025, and the challenges of expanding into consumer hardware, which requires managing supply chains, ensuring product quality, and controlling manufacturing costs. The company also identified a material weakness in its internal control over financial reporting as of December 31, 2024, related to a lack of sufficient and competent financial reporting and accounting personnel with U.S. GAAP and SEC reporting knowledge.

Management's message to shareholders conveys a tone of strategic adaptation and a focused effort to navigate a challenging operating environment. They acknowledge the material deterioration in the operating environment for independent AI solution providers in the PRC during 2025, citing increased competition from large integrated cloud platforms and tightening enterprise IT budgets. In response, management implemented a strategic realignment to concentrate resources on vertical applications where the company believes it can compete effectively and to reduce its overall cost base. This realignment involved discontinuing or scaling back lower-margin product lines and customer engagements, reducing headcount, consolidating office facilities, and reorienting research and development activities towards less capital-intensive, task-specific fine-tuning and commercialization. Management believes these actions were necessary and expects a notable decline in research and development expenses as the company pivots towards profitability. The company intends to retain future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future. Key strategic priorities for the period ahead include continuing to improve cognitive technology capabilities, further developing and creating long-term sustainable commercialization opportunities through innovation and product diversification, strengthening its leading position in metaverse-related products, expanding its customer base to include small and medium-sized customers, increasing integrated software and hardware products, and further expanding its global footprint, particularly with the commercialization of its AI-powered smart glasses and tAIkbox platform.