20-F/A: Xiao-I Reports Steep 2025 Losses Amid Strategic Realignment

Xiao-I Corporation reported a significant net loss of $101.82 million in 2025, driven by a strategic realignment and intense competition in the AI market, raising substantial doubt about its ability to continue as a going concern.

Summary

• Net revenue decreased by 82.5% to $12.33 million in 2025 from $70.31 million in 2024, primarily due to a strategic realignment and increased competition.
• The company incurred a net loss of $101.82 million in 2025, significantly wider than the $14.55 million net loss in 2024.
• Cash flow from operating activities remained negative, at $3.69 million in 2025, following $15.14 million in 2024 and $15.79 million in 2023.
• Gross profit declined to $5.48 million in 2025 from $48.05 million in 2024, with the gross profit margin falling to 44.4% from 68.3%.
• General and administrative expenses surged by 233.7% to $76.56 million in 2025, mainly due to non-recurring charges from headcount reductions and facilities consolidation.
• Research and development expenses decreased by 29.4% to $24.46 million in 2025, reflecting a shift towards less capital-intensive fine-tuning and commercialization of existing AI models.
• Maintenance and support services revenue was the only category to increase, growing by 98.8% to $4.81 million in 2025, indicating strong recurring support arrangements.
• The company launched AI-powered smart glasses in 2024, driving an 18-fold increase in hardware revenue to $1.40 million in 2024, and introduced tAIkbox, an advanced AI-powered customer service solution.
• Xiao-I implemented a one-for-nine reverse ADS split in August 2024 and a further one-for-twenty reverse ADS split in May 2026 to maintain Nasdaq listing compliance.
• The company is involved in multiple legal proceedings, including patent infringement litigation against Apple Inc. in China, and two securities class action lawsuits in the U.S.
• As of December 31, 2025, the company had an accumulated deficit of $226.56 million and negative working capital of $91.36 million, raising substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with a highly negative sentiment due to the substantial net loss, significant revenue decline, negative cash flows, and the explicit 'going concern' warning from auditors, despite some positive product developments and legal victories.

Positives

• Maintenance and support services revenue increased by 98.8% to $4.81 million in 2025, reflecting strong recurring customer relationships.
• The company successfully launched AI-powered smart glasses in 2024, leading to an 18-fold increase in hardware revenue to $1.40 million.
• Introduction of tAIkbox, an advanced AI-powered customer service solution integrating proprietary hardware and the Hua Zang LLM, indicates continued product innovation.
• The Supreme People's Court issued a final judgment on March 27, 2026, rejecting Apple's application to invalidate Xiao-I's patent for a Chat Robot System, affirming its legality and validity.
• The company regained compliance with Nasdaq's minimum bid price requirement in September 2024 and market value requirement in April 2026 after implementing reverse ADS splits.

Negatives

• Net loss significantly widened to $101.82 million in 2025 from $14.55 million in 2024.
• Net revenue decreased substantially by 82.5% to $12.33 million in 2025 from $70.31 million in 2024.
• Gross profit margin declined to 44.4% in 2025 from 68.3% in 2024.
• General and administrative expenses increased by 233.7% to $76.56 million in 2025, largely due to non-recurring severance and compensation payments from headcount reductions.
• The company had negative cash flows from operating activities for 2023, 2024, and 2025, totaling $15.79 million, $15.14 million, and $3.69 million, respectively.
• As of December 31, 2025, the company had an accumulated deficit of $226.56 million and negative working capital of $91.36 million.
• The auditors have raised substantial doubt about the company's ability to continue as a going concern.
• Significant decline in sales of cloud platform products (89.4%) and technology development services (91.1%) in 2025 due to strategic realignment and market conditions.
• The company faces significant risks related to customer concentration, with its largest customer accounting for 31.9% of revenue in 2025 and top five customers accounting for 65.8%.

Risks

• Recent U.S. Treasury rules on investment in Chinese AI and technology sectors may adversely impact the ability to attract U.S.-based investments and form partnerships.
• The company has a history of net losses and negative cash flows from operating activities, and may not achieve or sustain profitability.
• Failure to maintain and grow the customer base or adapt to evolving customer needs could hinder business growth.
• The AI industry market is highly competitive, with large integrated cloud platforms increasing pricing pressure, especially in the SME segment.
• Material errors, defects, or security issues in platforms could lead to customer loss, contractual liabilities, and significant remedial costs.
• Reliance on third-party service providers for essential services exposes the company to risks of interruption, delay, or unsatisfactory performance.
• Expansion into new industries, particularly consumer hardware, presents operational risks related to manufacturing, supply chain management, quality assurance, and distribution.
• Significant risks related to customers' ability to timely pay obligations, leading to increased allowance for credit losses and potential liquidity issues.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations, particularly concerning the VIE structure and foreign investment in internet businesses, could lead to severe penalties or loss of operational control.
• Some shareholders are not in compliance with PRC regulations (Circular 37) relating to offshore investment activities by PRC residents, potentially restricting fund transfers and foreign exchange businesses.
• The company may be classified as a PRC resident enterprise for tax purposes, leading to unfavorable tax consequences on worldwide income and dividends.
• The Holding Foreign Companies Accountable Act (HFCAA) and Accelerating Holding Foreign Companies Accountable Act (AHFCAA) could lead to delisting from Nasdaq if auditors are not fully inspected by the PCAOB.
• Difficulty for overseas regulators to conduct investigations or collect evidence within China, limiting protection for U.S. investors.
• Changes in U.S. trade policy, including tariffs, could adversely impact business and results of operations.
• As a Cayman Islands company, shareholders may face difficulties in protecting their interests through U.S. Federal courts due to differences in corporate law and enforceability of judgments.
• The company does not expect to pay dividends in the foreseeable future, requiring investors to rely on price appreciation for returns.
• The trading price of ADSs is likely to be volatile, and substantial sales of ADSs could adversely affect market price.
• Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise rights, with limited recourse against the depositary.
• The company is an emerging growth company and foreign private issuer, taking advantage of reduced reporting requirements, which may afford less protection to shareholders.

Future Outlook

The company intends to keep any future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future. Management plans to improve operational efficiency, implement strict cost control, and enhance internal controls to create resource synergy. The company is also negotiating liability extensions and seeking new bank financing to support daily operations. However, there is no assurance that these plans will alleviate the substantial doubt about the company's ability to continue as a going concern.

Management Comments

• Management believes the strategic realignment actions taken in 2025 were necessary in light of the operating environment, which included increased competition and tightening enterprise IT budgets.
• Management plans to focus on improving operation efficiency, implementing strict cost control and budget, and enhancing internal controls to create a synergy of resources.
• Management does not currently expect the outcome of labor disputes to have a material adverse effect on its consolidated financial statements, but acknowledges potential impacts on employee morale, operational efficiency, or public perception.
• Management believes the claims in the securities class action lawsuits are without merit and intends to vigorously defend the actions.

Industry Context

StockSavvy.ai notes that the AI industry in China is experiencing intense competition, particularly from large integrated cloud platforms that are bundling AI customer-service offerings at significantly lower price points or with free usage allowances. This trend is increasing pricing pressure on independent vendors like Xiao-I, especially in the smalland medium-enterprise (SME) segment. The broader macroeconomic conditions in the PRC are also leading to tightening enterprise IT budgets and longer customer decision cycles for AI-related expenditures, with increased scrutiny on return-on-investment. The company's strategic realignment to focus on vertical applications and edge-deployment options is a direct response to these challenging market dynamics, aiming to leverage its domain expertise and customization capabilities for differentiation. The expansion into consumer hardware, such as AI-powered smart glasses, aligns with a rising demand for wearable AI technology, but also introduces new operational risks in manufacturing and distribution.

Comparison to Industry Standards

• Xiao-I operates in a highly competitive AI industry, competing with global giants like Apple (Siri), Microsoft (Cortana), and Amazon (Echo) in conversational AI, as well as major Chinese competitors such as Baidu, Alibaba, and Tencent.
• The company's gross profit margin of 44.4% in 2025 is significantly lower than its 68.3% in 2024, indicating a substantial impact from competitive pricing and strategic realignment, potentially falling below industry averages for specialized AI software providers.
• The substantial net loss of $101.82 million in 2025, coupled with negative operating cash flows and accumulated deficit, suggests a financial performance that is significantly below industry standards for profitable growth-stage technology companies.
• The company's reliance on a limited number of major customers (top 3 accounted for 31.9% of revenue in 2025) and suppliers (top 3 accounted for 56.1% of total purchases in 2025) indicates a concentration risk that is higher than typically desired for diversified technology firms, making it vulnerable to changes in these relationships.
• The ongoing legal proceedings, including patent infringement against Apple and multiple securities class actions, represent a higher level of litigation exposure compared to many industry peers, potentially diverting significant resources and impacting investor confidence.

Management Changes

Corporate Governance

Legal Proceedings

• **Patent Infringement Litigation (Apple Inc. in China):** Shanghai Xiao-I filed a lawsuit against Apple Inc. on August 3, 2020, alleging infringement of its intelligent assistant patent (ZL200410053749.9) by Siri, seeking 10 billion RMB in damages. Apple filed a countersuit on February 3, 2023, seeking confirmation of non-infringement and 2 million RMB in compensation. The cases were merged for trial on January 29, 2024, and trial proceedings concluded on July 31, 2024, with a verdict pending. On March 27, 2026, the Supreme People's Court issued a final judgment rejecting Apple's patent invalidation request, affirming the legality and validity of Xiao-I's patent.
• **Securities Class Action (New York State Court):** Filed on June 26, 2024, against Xiao-I Corporation and certain officers/directors, alleging violations of the Securities Act of 1933 due to materially misleading statements/omissions in IPO registration and prospectus. An amended complaint was filed on September 13, 2024. A motion to dismiss was granted on April 24, 2025.
• **Securities Class Action (U.S. District Court, Southern District of New York):** Filed on October 15, 2024, alleging violations of the Securities Act and Securities Exchange Act of 1934, focusing on similar alleged misrepresentations and failure to disclose material risks. Pre-motion to dismiss letters were submitted on May 7, 2025, and a second amended complaint was filed on June 30, 2025. A motion to dismiss was filed on September 2, 2025, with no ruling yet.
• **PRC Financial Contract Dispute (China Construction Bank):** In May 2025, the Huangpu District People's Court of Shanghai accepted a case against Shanghai Xiao-I, seeking repayment of loan principal and penalty interest totaling RMB 25,036,162.25 ($3,494,913). A final judgment ordered the defendant to pay the claimed amount.
• **PRC Private Lending Dispute (Quan Feng):** In July 2025, the Qingpu District People's Court of Shanghai accepted a case against Shanghai Xiao-I, seeking repayment of principal, interest, and legal fees totaling RMB 15,116,000 ($2,110,112). The case was resolved through mediation with an installment repayment plan.
• **PRC Private Lending Dispute (Shanghai Tianyong Asset Management):** In June 2025, the Huangpu District People's Court of Shanghai accepted a case against Shanghai Xiao-I, seeking payment of principal and attorney fees totaling RMB 13,060,000 ($1,823,106) plus interest. The case was transferred to Jiading District People's Court in August 2025, with no judgment yet rendered after a March 19, 2026 hearing.
• **PRC Financial Contract Dispute (Jiangsu Bank):** In July 2025, the Jiading District People's Court of Shanghai accepted a case against Shanghai Xiao-I, seeking repayment of loan principal, penalty interest, compound interest, attorney fees, and litigation costs totaling RMB 20,139,027.78 ($2,811,300). A final judgment on appeal upheld the original judgment on April 28, 2025.
• **PRC Financial Contract Dispute (Bank of Ningbo):** In October 2025, the Pudong New Area People's Court of Shanghai accepted a case against Shanghai Xiao-I, seeking repayment of loan principal, penalty interest, and compound interest totaling RMB 20,151,522.30 ($2,813,044). The case has been heard, but no judgment has been rendered.
• **PRC Financial Contract Dispute (Bank of Beijing):** In April 2026, the Shanghai Pudong New Area People's Court accepted a case against Shanghai Xiao-I, seeking repayment of loan principal, interest, and attorney fees totaling RMB 20,892,235.63. A hearing is scheduled for June 23, 2026.
• **PRC Labor Disputes:** During 2025, the company was involved in over 109 labor disputes in China, primarily related to claims for unpaid wages, social insurance, housing fund payments, and severance compensation, totaling over RMB 18 million. More than 35 cases are pending before local labor arbitration authorities.

Related Party Transactions

• **Loans to Zhizhen Guorui:** The Group provided an interest-free loan of up to $14,084,705 (RMB100.0 million) to Zhizhen Guorui (an equity investment of the Group) on March 31, 2023. As of December 31, 2024, the actual loan was $13,480,745 (RMB98.4 million). A full provision for credit losses was made in 2025.
• **Prepayment to Zhizhen Guorui:** Prepayments of $106,791 (2024) and $21,356 (2025) were made to Zhizhen Guorui for technology development services.
• **Other Receivable from Shanghai Aoshu:** Payment to an employee on behalf of Shanghai Aoshu (employee stock ownership platform). Full provision for credit losses made for 2023, 2024, and 2025.
• **Interest-free loans from Hui Yuan:** Hui Yuan provided several interest-free loans for daily operations before 2022. In 2023, an annual interest rate of 6.8% was established for outstanding loans. Balances due to Hui Yuan were $7,336,833 (2024) and $7,602,043 (2025).
• **Technology Service Fees:** Payable to Zhizhen Guorui ($180,173 in 2025) and Shanghai Shenghan ($3,409 in 2025). Paid to Zhizhen Guorui ($92,499 in 2025) and Shanghai Shenghan ($3,409 in 2025).
• **Issuance of Preferred Shares to ZunTian Holding Limited:** On December 13, 2023, 3,700,000 preferred shares were issued to ZunTian Holding Limited, a company wholly owned and controlled by Mr. Hui Yuan, an existing shareholder and former CEO/Chairman. These shares carry 20 votes each but no other financial rights.

Stakeholder Impact

• **Shareholders:** Face significant dilution from convertible notes and reverse ADS splits. The substantial net losses, negative cash flows, and 'going concern' warning indicate a high risk to investment value. Securities class action lawsuits add further uncertainty and potential financial liability. The lack of anticipated dividends means returns depend solely on stock price appreciation.
• **Employees:** Affected by workforce optimization initiatives, leading to layoffs and labor disputes over unpaid wages, social insurance, and severance compensation. This could negatively impact morale and retention.
• **Customers:** The strategic realignment in 2025 led to the discontinuation or scaling back of certain product lines and engagements, potentially impacting service continuity for some customers. However, the focus on higher-value offerings and increased maintenance and support revenue suggests a commitment to core customer relationships.
• **Suppliers:** The company's reliance on a limited number of suppliers for essential services creates risk for both the company and its suppliers if relationships are disrupted or payment terms are affected by the company's financial condition. Overdue borrowings from third parties indicate potential payment issues.
• **Creditors:** Exposed to increased risk due to the company's accumulated deficit, negative working capital, and 'going concern' uncertainty. Multiple financial contract disputes and overdue borrowings highlight challenges in meeting financial obligations.

Next Steps

• Negotiate liabilities extension for borrowings and loans from third parties.
• Secure new bank financing to support daily operations.
• Focus on improving operational efficiency, implementing strict cost control, and enhancing internal controls.
• Continue to develop and expand the Hua Zang Ecosystem and LLM commercialization.
• Further strengthen the leading position in Metaverse-related products.
• Expand customer base and make full use of existing customers through market segmentation and personalization.
• Increase hardware products, including integrated software and hardware offerings.
• Further expand global footprint strategically, internationalizing products and services.
• Further expand product line of business to consumers (2C business) with LLM development.
• Actively engage with relevant agencies to seek resolution for labor disputes.
• Continue to vigorously contest securities class action lawsuits and monitor patent litigation.

Key Dates

Recommendation

The company's financial performance in 2025 was severely negative, with a massive net loss of over $100 million and an 82.5% decline in revenue. The auditors have explicitly raised 'substantial doubt about the company's ability to continue as a going concern,' which is a critical red flag for investors. While there are some positive developments in product innovation and intellectual property, these are overshadowed by significant operational challenges, intense competition, and a precarious financial position. The ongoing legal proceedings, including multiple class action lawsuits and financial disputes, add further uncertainty and potential liabilities. The repeated reverse ADS splits, while addressing listing compliance, often signal underlying issues and can erode investor confidence. Given the severe financial distress and high operational risks, a seasoned investor would likely recommend a strong sell.

Keywords

Artificial Intelligence, AI, Cognitive AI, Large Language Model, LLM, Hua Zang, Smart Glasses, tAIkbox, SEC Filing, Form 20-F/A, Nasdaq, China, VIE Structure, Financial Results, Net Loss, Revenue Decline, Going Concern, Patent Infringement, Securities Class Action, Capital Raise, Convertible Notes, Corporate Governance, R&D, Cybersecurity, Trade Policy