As filed with the Securities and Exchange Commission on February 13, 2023

Registration No. 333-268889

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

____________________________________

Amendment No. 1
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

____________________________________

XIAO-I CORPORATION

(Exact name of Registrant as specified in its charter)

____________________________________

Not Applicable

(Translation of Registrant’s name into English)

Cayman Islands		7372		Not Applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

7th floor, Building 398, No. 1555 West
Jinshajiang Rd
Shanghai, China 201803
Tel: +86 021-39512112

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

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GKL Corporate/Search, Inc.

One Capitol Mall, Suite 660

Sacramento, CA 95814

Phone: (800) 446-5455

(Name, address, including zip code, and telephone number, including area code, of agent for service)

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Copies to:

Charlotte Westfall, Esq.
Fred A. Summer, Esq.
Squire Patton Boggs (US) LLP
475 Sansome Street, 16th Floor
San Francisco, California 94111
Phone: (415) 954-0200

Francis Li, Esq.
Squire Patton Boggs
29th Floor, Edinburgh Tower
The Landmark,
15 Queen’s Road Central
Central, Hong Kong
Phone: + (852) 2103 0368

Arila Zhou, Esq.
Anna Jinhua Wang, Esq.
Robinson & Cole LLP
666 Third Avenue, 20th Floor
New York, New York 10017
Phone: (212) 451-2900

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Approximate date of commencement of proposed sale to the public:
as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. Xiao-I may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and Xiao-I is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS, DATED February 13, 2023

6,000,000 American Depositary Shares

XIAO-I CORPORATION

Representing 2,000,000 Ordinary Shares

This is an initial public offering, or the “offering,” of 6,000,000 American depositary shares, or ADSs (each, an “ADS”, collectively, “ADSs”), each represents one-third of an ordinary share, par value US$0.00005 per share, of Xiao-I Corporation, a holding company incorporated in the Cayman Islands (“Xiao-I” or the “Company”) whose principal place of business is in Shanghai, China, on a firm commitment basis.

Prior to this offering, there has been no public market for Xiao-I’s ADSs or Ordinary Shares. Xiao-I expects that the initial public offering price will be in the range of $6.8 to $8.8 per ADS. It intends to list the ADSs on the Nasdaq Global Market under the symbol “XI.” However, there is no assurance that the offering will be closed and its ADSs will be trading on the Nasdaq Global market. This offering is contingent upon the final approval from Nasdaq for the listing of Xiao-I’s ADSs on Nasdaq Global Market. Xiao-I will not proceed to consummate this offering if Nasdaq denies its listing.

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

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Xiao-I is an “emerging growth company” under applicable U.S. federal securities laws and is eligible for reduced public company reporting requirements. See “Risk Factors” beginning on page 39 for factors you should consider before investing in Xiao-I’s ADSs.

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Xiao-I is a holding company incorporated in the Cayman Islands. As a holding company with no material operations of its own, Xiao-I conducts a substantial majority of its operations through Shanghai Xiao-i Robot Technology Co., Ltd. (“Shanghai Xiao-i”), a variable interest entity (the “VIE”), in the People’s Republic of China, or “PRC” or “China.” Investors in Xiao-I’s ADSs should be aware that they may never hold equity interests in the VIE, but rather purchasing equity interests solely in Xiao-I, the Cayman Islands holding company, which does not own any of the business in China conducted by the VIE and the VIE’s subsidiaries (“the PRC operating entities”). The ADSs offered in this offering represent shares of the Cayman Islands holding company instead of shares of the VIE in China.

Xiao-I’s indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. (“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. 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. 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. A VIE is an entity in which a company or its WFOE, 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 or its WFOE is the primary beneficiary of the entity for accounting purposes. 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. 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. 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. 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. 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. See “Prospectus Summary — Our History and Corporate Structure” beginning on page 6 of this prospectus for a summary of the contractual arrangements and “Risk Factors — Risks Relating to Our Corporate Structure” beginning on page 52 of this prospectus for certain risks relating to the contractual arrangements.

As of the date of this prospectus, no cash transfer or transfer of other assets by way of dividends or distributions have occurred among the Company, its subsidiaries, or the PRC operating entities. Xiao-I intends to keep any future earnings to finance the expansion of its business, and it does not anticipate that any cash dividends will be paid, or any funds will be transferred from one entity to another, in the foreseeable future. As such, Xiao-I has not installed any cash management policies that dictate how funds are transferred among the Company, its subsidiaries, or investors, or the PRC operating entities. For further details, please refer to “Prospectus Summary — Consolidation” beginning on page 18.

Xiao-I is a holding company with no operations of its own. Xiao-I conducts its operations in China primarily through the PRC operating entities in China. As a result, although other means are available for it to obtain financing at the holding company level, Xiao-I’s ability to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and other distributions paid by Xiao-I’s PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such debt may restrict its ability to pay dividends and other distributions to Xiao-I.

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PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, Xiao-I’s Hong Kong subsidiary is able to transfer cash without any limitation to the Cayman Islands under normal circumstances. As a result of these PRC laws and regulations, the PRC operating entities and WFOE are restricted in their ability to transfer a portion of their net assets to the Company.

Moreover, the transfer of funds among the PRC operating entities are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Second Amendment Revision, 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. As advised by Xiao-I’s PRC counsel, Jingtian & Gongcheng, the Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating entity’s operations. Xiao-I or the PRC operating entities have not been notified of any other restriction which could limit the PRC operating entities’ ability to transfer cash among each other. In the future, cash proceeds from overseas financing activities, including this offering, may be transferred by Xiao-I to its wholly-owned subsidiary AI Plus Holding Limited (“AI Plus”), and then transferred to AI Plus’s wholly-owned subsidiary Xiao-i Technology Limited (Xiao-i Technology”), and then transferred to WFOE via capital contribution or shareholder loans, as the case may be. 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.

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. If Xiao-I determines to pay dividends on any of its Ordinary Shares in the future, as a holding company, Xiao-I will rely on payments made from Shanghai Xiao-i to WFOE, pursuant to the VIE Agreements, and the distribution of such payments to Xiao-i Technology from WFOE, and then to AI Plus from Xiao-i Technology, and then to Xiao-I from AI Plus as dividends, unless Xiao-I receives proceeds from future offerings. 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. See “Prospectus Summary — Transfers of Cash to and from the VIE” on page 26 and “Risk Factors — Risks Relating to Doing Business in China — 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” on page 66 of this prospectus.

Additionally, Xiao-I is subject to certain legal and operational risks associated with the operations of the PRC operating entities in China. PRC laws and regulations governing the PRC operating entities’ current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in the PRC operating entities’ operations, significant depreciation of the value of Xiao-I’s ADSs, or a complete hindrance of its ability to offer or continue to offer its securities to investors. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews and expanding the efforts in anti-monopoly enforcement. It is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of Xiao-I’s subsidiaries and the PRC operating entities, Xiao-I’s ability to accept foreign investments, and Xiao-I’s listing on a U.S. stock exchange. The Standing Committee of the National People’s Congress (the “SCNPC”) or PRC regulatory authorities may in the future promulgate laws, regulations, or implement rules that require the Company, its subsidiaries, or the PRC operating entities to obtain regulatory approval from Chinese authorities before listing in the U.S. In other words, although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, its operations could be adversely affected, directly or indirectly; its ability to offer, or continue to offer, securities to investors would be potentially hindered and the value of its securities might significantly decline or be worthless, by existing or future laws and regulations relating to its business or industry or by intervene or interruption by PRC governmental authorities, if the Company, or its subsidiaries or the PRC operating entities (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, (iii) applicable laws, regulations, or interpretations change and the Company, or its subsidiaries or the PRC operating entities are required to obtain such permissions or approvals in the future, or (iv) any intervention or interruption by PRC governmental with little advance notice.

The PRC operating entities generated approximately 2.3% and 11.7% of their revenues from Hong Kong in fiscal year 2021 and 2020, respectively. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. Xiao-I cannot assure you that there will not be any changes in the economic, political and legal environment in Hong Kong. Xiao-I may be subject to uncertainty about any future actions of the PRC government and is possible that most of the legal and operational risks associated with operating in the PRC may also apply to the PRC operating entities’ operations in Hong Kong in the future. The PRC government may intervene or influence the PRC operating entities’ current and future operations in Hong Kong at any time and exert more influence over the manner in which the PRC operating entities must conduct their business activities. Such government actions, if and when they occur, could result in a material change in their operations in Hong Kong.

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. The competition law in Hong Kong is primarily governed by the Competition Ordinance (Chapter 619 of the Laws of Hong Kong), which prohibits three principal types of anti-competitive conducts, namely (a) anti-competitive agreements or practices; (b) abuse of market power; and (c) merger control of arrangements that could substantially reduce the level of competition in telecommunication industry. The Merger Rule in the Competition Ordinance prohibits undertakings from directly or indirectly carrying out a merger that has, or is likely to have, the effect of substantially reduce the level of competition in Hong Kong. This rule is only applicable to telecommunication carrier licensees. There is no general merger control regime in Hong Kong. See “Regulations in Hong Kong — Competition law in Hong Kong” for further details.

As of the date of this prospectus, the PRC operating entities’ business operations in Hong Kong, which are relatively insignificant as compared to their business as a whole, are only required to comply with the Hong Kong laws and regulations. The PRC government has recently initiated a series of regulatory actions and statements to regulate business operations in mainland China with little advance notice. Xiao-I does not expect such statements by the PRC government would have any specific impact on the PRC operating entities’ business operations in Hong Kong. If there is any change in political arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally.

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The PRC operating entities’ operations in China are governed by PRC laws and regulations. Xiao-I’s PRC counsel, Jingtian & Gongcheng, has advised Xiao-I that, as of the date of this prospectus, based on their understanding of the current PRC laws, regulations and rules, Xiao-I, its subsidiaries, the PRC operating entities have received all requisite permissions and approvals from the PRC government authorities for their business operations currently conducted in China.

Neither has Xiao-I nor its subsidiaries, nor the PRC operating entities received any denial of permissions for their business operations currently conducted in China. These permissions and approvals include (without limitation) License for Value-added Telecommunications Services, Business License, Record Registration Form for Foreign Trade Business Operators, Customs Declaration Entity Registration Certificate. Xiao-I’s PRC counsel, Jingtian & Gongcheng, has advised Xiao-I that, as of the date of this prospectus, based on their understanding of the current PRC laws, regulations and rules, Xiao-I, its subsidiaries, the PRC operating entities are currently not required to obtain permission from any of the PRC authorities to issue ADSs or Ordinary Shares to foreign investors.

However, Xiao-I is subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that Xiao-I inadvertently concludes that the permissions or approvals discussed here are not required, that applicable laws, regulations or interpretations change such that Xiao-I is required to obtain approvals in the future, or that the PRC government could disallow Xiao-I’s holding company structure, which would likely result in a material change in its operations, including its ability to continue its existing holding company structure, carry on its current business, accept foreign investments, and offer or continue to offer securities to its investors. These adverse actions could cause the value of Xiao-I’s ADSs to significantly decline or become worthless. Xiao-I may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if it fails to comply with such rules and regulations, which would likely adversely affect the ability of Xiao-I’s securities to be listed on a U.S. exchange, which would likely cause the value of Xiao-I’s securities to significantly decline or become worthless.

Permission from Cyberspace Administration of China. Shanghai Xiao-i has applied for a cybersecurity review organized by the China Cybersecurity Review Technology and Certification Center (the “Center”), which is authorized by the Cybersecurity Review Office of the Cyberspace Administration of China (the “CAC”) to accept public consultation and cybersecurity review submissions, pursuant to the Cybersecurity Review Measures, which became effective on February 15, 2022. On August 25, 2022, Shanghai Xiao-i received a written notice from the Cybersecurity Review Office, pursuant to which cybersecurity review is not required for the offering.

PRC Limitation on Overseas Listing and Share Issuances. The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative Provisions, the “Draft Rules Regarding Overseas Listing”), both of which have a comment period that expired on January 23, 2022. As of the date of this prospectus, the Draft Rules Regarding Overseas Listing have not been formally adopted or released. The Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in an overseas market, the record-filing obligation is with a major operating entity incorporated in the PRC and such filing obligation shall be completed within three working days after the overseas listing application is submitted. The required filing materials for an initial public offering and listing shall include but not limited to: regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable).

If the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that Xiao-I obtain their approvals for this offering and any follow-on offerings, Xiao-I may be unable to obtain such approvals and it may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek such approvals which could significantly limit or completely hinder its ability to offer or continue to offer securities to its investors and the securities currently being offered may substantially decline in value and be worthless.

Both Xiao-I and Xiao-I’s PRC counsel, Jingtian & Gongcheng believe the CSRC’s approval is not required for the offering and trading of Xiao-I’s ADSs on Nasdaq in the context of this offering, given that: (i) WFOE was incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are Xiao-I’s beneficial owners; (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like this offering are subject to the M&A Rules; and (iii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules. As of the date of this prospectus, no relevant laws or regulations in the PRC explicitly require the Company, its subsidiaries or the PRC operating entities to seek approval from the CSRC or any other PRC governmental authorities for this offering, nor has the Company, any of its subsidiaries or the PRC operating entities received any inquiry, notice, warning or sanctions regarding Xiao-I’s planned offering from the CSRC or any other PRC governmental authorities. However, since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation rules have not been issued, there remain some uncertainties as to how the rules will be interpreted or implemented in the context of an overseas offering and the potential impact such modified or new laws and regulations will have on the daily business operation of the PRC operating entities. Xiao-I and its PRC counsel, Jingtian & Gongcheng cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as they do. As of the date hereof, Xiao-I, its subsidiaries and the PRC operating entities have not received any inquiries, notices, warnings, sanctions, denials, or regulatory objections from the CSRC, CAC, nor any other PRC regulatory authority. The PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that requires the Company, its subsidiaries or the PRC operating entities to obtain regulatory approval from Chinese authorities before listing in the U.S. If it is determined that CSRC approval is required for this offering, Xiao-I may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval for this offering.

For more detailed information, see “Risk Factors — Risks Relating to Doing Business in China — Draft rules for China-based companies seeking for securities offerings in foreign stock markets was released by the CSRC. While such rules have not yet come into effect, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder Xiao-I’s ability to offer or continue to offer Xiao-I’s ADSs to investors and could cause the value of its ADSs to significantly decline or become worthless” on page 64 of this prospectus.

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Pursuant to the Holding Foreign Companies Accountable Act (the “HFCAA”), if the Public Company Accounting Oversight Board (the “PCAOB”), is unable to inspect an issuer’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a U.S. stock exchange. The PCAOB issued a Determination Report on December 16, 2021 (the “Determination Report”) which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. Furthermore, the Determination Report identified the specific registered public accounting firms which are subject to these determinations (“PCAOB Identified Firms”). On June 22, 2021, United States Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which, if enacted, would decrease the number of “non-inspection years” from three years to two years, and thus, would reduce the time before Xiao-I’s securities may be prohibited from trading or delisted if the PCAOB determines that it cannot inspect or investigate completely Xiao-I’s auditor.

Xiao-I’s current auditor, Marcum Asia CPAs LLP (“Marcum Asia”), the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Marcum Asia, whose audit report is included in this prospectus, is headquartered in New York, New York, and, as of the date of this prospectus, was not included in the list of PCAOB Identified Firms in the Determination Report.

On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission (the “CSRC”) and the Ministry of Finance (“MOF”) of the People’s Republic of China, governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022.

On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report.

On December 29, 2022, the Consolidated Appropriations Act, 2023 (the “CAA”) was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.

Notwithstanding the foregoing, Xiao-I’s ability to retain an auditor subject to the PCAOB inspection and investigation, including but not limited to inspection of the audit working papers related to Xiao-I, may depend on the relevant positions of U.S. and Chinese regulators. Marcum Asia’s audit working papers related to Xiao-I are located in China. With respect to audits of companies with operations in China, such as the Company, there are uncertainties about the ability of its auditor to fully cooperate with a request by the PCAOB for audit working papers in China without the approval of Chinese authorities. If the PCAOB is unable to inspect or investigate completely the Company’s auditor because of a position taken by an authority in a foreign jurisdiction, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol, then such lack of inspection or re-evaluation could cause trading in the Company’s securities to be prohibited under the HFCAA, and ultimately result in a determination by a securities exchange to delist the Company’s securities. Accordingly, the HFCAA calls for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to Xiao-I’s offering.

See “Risk Factors — Risks Relating to Doing Business in China — The newly enacted Holding Foreign Companies Accountable Act and the Accelerating Holding Foreign Companies Accountable Act passed by the U.S. Senate, all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor” on page 60 of this prospectus.

Investing in Xiao-I’s ADSs involves a high degree of risk. See “Risk Factors” beginning on page 39 of this prospectus.

	Per ADS	Total
Initial public offering price	US$ [______]	US$ [______]
Underwriting discounts and commissions (7%) for sales to investors introduced by the underwriter(1)	US$ [______]	US$ [______]
Proceeds, before expenses, to Xiao-I(2)	US$ [______]	US$

____________

(1) See “Underwriting” beginning on page 190 for additional disclosure regarding underwriting compensation payable by Xiao-I.

(2) The total estimated expenses related to this offering are set forth in the section entitled “Underwriting — Discounts, Commissions and Expenses.”

The underwriters are selling 6,000,000 ADSs (or 6,900,000 ADSs if the underwriters exercise their option to purchase additional ADSs in full) in this Offering on a firm commitment basis.

Xiao-I has granted the underwriters an option to purchase up to an additional 900,000 ADSs within 45 days from the date this prospectus at the initial public offering price, less the underwriting discounts and commissions.

The underwriters expect to deliver the ADSs against payment in U.S. dollars to the purchasers on or about [•], 2023.

Guotai Junan International

Prospectus dated [•], 2023

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TABLE OF CONTENTS

		Page
PROSPECTUS SUMMARY		4
THE OFFERING		35
RISK FACTORS		39
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		83
USE OF PROCEEDS		84
DIVIDEND POLICY		85
CAPITALIZATION		86
EXCHANGE RATE INFORMATION		87
DILUTION		88
CORPORATE HISTORY AND STRUCTURE		90
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		93
INDUSTRY OVERVIEW		108
BUSINESS		117
PRC REGULATION		132
MANAGEMENT		145
BOARD OF DIRECTORS		147
EXECUTIVE COMPENSATION		151
PRINCIPAL SHAREHOLDERS		153
RELATED PARTY TRANSACTIONS		156
DESCRIPTION OF SHARE CAPITAL		159
DESCRIPTION OF AMERICAN DEPOSITARY SHARES		169
ORDINARY SHARES AND ADSs ELIGIBLE FOR FUTURE SALE		180
TAXATION		182
ENFORCEABILITY OF CIVIL LIABILITIES		188
UNDERWRITING		190
EXPENSES RELATING TO THIS OFFERING		199
LEGAL MATTERS		200
EXPERTS		200
WHERE YOU CAN FIND ADDITIONAL INFORMATION		200
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. Xiao-I has not authorized anyone to provide you with information different from that contained in this prospectus or in any related free-writing prospectus. Xiao-I is offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ADSs. Xiao-I has not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus or any filed free writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of this prospectus or any filed free writing prospectus outside the United States.

This prospectus includes statistical and other industry and market data that Xiao-I obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable. While Xiao-I believes these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information.

Until [•], 2023 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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ABOUT THIS PROSPECTUS

Xiao-I and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by Xiao-I or on its behalf or to which Xiao-I has referred you. Xiao-I takes no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. Xiao-I is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for ADSs is made to the public in the Cayman Islands. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Xiao-I’s business, financial condition, results of operations and prospects may have changed since that date.

Conventions that apply to this Prospectus

Unless otherwise indicated or the context requires otherwise, the reference in this prospectus to:

• “Xiao-I” or the “Company” is to Xiao-I Corporation, an exempted company with limited liability incorporated under the laws of Cayman Islands;

• “AI Plus” is to AI Plus Holding Limited, organized under the law of British Virgin Islands, as Xiao-I’s intermediate holding company;

• “Xiao-i Technology” is to Xiao-i Technology Limited, organized under the law of Hong Kong, which is wholly owned by AI Plus;

• “WFOE” is to Zhizhen Artificial Technology (Shanghai) Company Limited (“Zhizhen Technology”), a limited liability company established and existing under the laws of the PRC, which is wholly owned by Xiao-i Technology;

• “Shanghai Xiao-i” or the “VIE” is to Shanghai Xiao-i Robot Technology Company Limited, a company limited by shares established and existing under the laws of the PRC;

• “the PRC operating entities” refers to the VIE, Shanghai Xiao-i, and its subsidiaries;

• “Memorandum and Articles of Association” means the amended and restated memorandum of association (“Memorandum”) and the amended and restated articles of association (“Articles of Association”) of Xiao-I;

• “China” or the “PRC” are to the People’s Republic of China, including the special administrative regions of Hong Kong and Macau, and excluding Taiwan for the purposes of this prospectus only; the term “Chinese” has a correlative meaning for the purpose of this prospectus;

• “mainland China”, “mainland of PRC” or “mainland PRC” are to the mainland China of the PRC, excluding Taiwan, the special administrative regions of Hong Kong and Macau for the purposes of this prospectus only; the term “mainland Chinese” has a correlative meaning for the purpose of this prospectus;

• “PRC government”, “PRC regulatory authorities”, “PRC authorities”, “PRC governmental authorities”, “Chinese government”, “Chinese authorities” or “Chinese governmental authorities” is to the government of mainland China for the purposes of this prospectus only; and the similar wordings have a correlative meaning for the purpose of this prospectus;

• “PRC laws and regulations”, “PRC laws”, “laws of PRC”, “Chinese laws and regulations” or “Chinese laws” are to the laws and regulations of mainland China; and the similar wordings have a correlative meaning for the purpose of this prospectus;

• “Ordinary Shares” are to the ordinary shares of the Company, par value US$0.00005 per share;

• “$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” are to U.S. dollars;

• “RMB” and “¥” are to Renminbi;

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• “Companies Act” is to the Companies Act (As Revised), Cap. 22 of the Cayman Islands.

• “ADSs” refer to Xiao-I’s American depositary shares, each of which represents one-third of an Ordinary Share.

The PRC operating entities’ business is conducted in the PRC using RMB, the currency of China. Xiao-I’s consolidated financial statements are presented in United States dollars. In this prospectus, Xiao-I refers to assets, obligations, commitments, and liabilities in its consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to United States dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of Xiao-I’s obligations and the value of its assets in terms of United States dollars which may result in an increase or decrease in the amount of Xiao-I’s obligations (expressed in dollars) and the value of its assets, including accounts receivable (expressed in dollars).

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PRESENTATION OF FINANCIAL INFORMATION

The consolidated financial statements included in this prospectus have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The reporting currency is United States dollar. Unless otherwise indicated, all monetary amounts in this prospectus are in U.S. dollars.

This prospectus contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at RMB6.3726 to $1.00 on December 30, 2021, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. Xiao-I makes no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On June 1, 2022, the noon buying rate in New York for cable transfers payable in Renminbi was RMB6.6858 to $1.00. Xiao-I has made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before deciding whether to buy Xiao-I’s ADSs. You should read this entire prospectus carefully, including “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Xiao-I’s consolidated financial statements, including the notes thereto, before making an investment decision. This prospectus contains information from an industry report commissioned by Xiao-I and prepared by Frost & Sullivan, an independent research firm, to provide information regarding the PRC operating entities’ industry and their market position in China.

Investors should note that Xiao-I, the ultimate Cayman Islands holding company, does not own any substantive operations in the PRC and the businesses in the PRC described in this prospectus are operated through the PRC operating entities in China.

Xiao-I’s Mission

Xiao-I’s mission is to leverage Shanghai Xiao-i’s advanced core artificial intelligence technology to make the world a better place.

Overview

Xiao-I is a holding company incorporated in the Cayman Islands. As a holding company with no material operations of its own, Xiao-I conducts a substantial majority of its operations through Shanghai Xiao-i, the VIE, in the PRC. Investors in Xiao-I’s ADSs or Ordinary Shares should be aware that they may never hold equity interests in the VIE, but rather purchasing equity interests solely in Xiao-I, the Cayman Islands holding company, which does not own any of the businesses in China conducted by the PRC operating entities. The ADSs offered in this offering represent shares of the Cayman Islands holding company instead of shares of the VIE in China.

Shanghai Yingsi Software Technology Co., Ltd. (“Incesoft”) was founded in 2001. 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. Following the acquisition, Incesoft was dissolved by de-registering with local company registrar in accordance with PRC law in 2012. 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.

Milestone Accomplishments over 20 Years History

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Since its founding in 2001, Shanghai Xiao-i has developed a portfolio of cognitive intelligence technologies for businesses based on its natural language processing and AI implementation. Leveraging its cutting-edge technologies, dedicated services, and long-standing customer base, it has become a leading customer service solution company in China according to Frost & Sullivan. It focuses on the development and promotion of cognitive intelligence technology and products with natural language processing as the core, and it uses cognitive intelligence products and services to enable and promote industrial digitization and intelligent upgrading and transformation.

Shanghai Xiao-i is a leading cognitive intelligence enterprise in China, integrating parts of perceptive intelligence like natural language processing and computer vision. It offers a wide range of business services in AI, covering natural language processing, computer vision, machine learning and cloud computing. It has multi-field data resources and multiple industry standards, a cutting-edge talent team training system and strong experience in resource integration. It primarily provides smart city, software business and architectural design AI services to its customers.

Shanghai Xiao-i has comprehensive business lines covering fundamental tech platform, conversation bot, cloud services, industry solutions and robotics solutions.

Shanghai Xiao-i’s cognitive intelligence artificial intelligence (“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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Xiao-I’s History and Corporate Structure

Xiao-I was incorporated in the Cayman Islands on August 13, 2018, with limited liability under the Companies Act. Upon incorporation, the authorized share capital of the 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. The Company is a holding company.

On August 30, 2018, Xiao-I established its wholly-owned subsidiary AI Plus, under the law of British Virgin Islands, as its intermediate holding company, which then established its wholly-owned subsidiary, Xiao-i Technology under the law of Hong Kong, which in turn established a wholly-owned PRC subsidiary, Zhizhen Technology or WFOE, on March 29, 2019. Subsequently, Xiao-I, through WFOE, entered into a series of contractual arrangements with Shanghai Xiao-i and its shareholders whereby Xiao-I was established as the primary beneficiary of Shanghai Xiao-i for accounting purposes. Xiao-I has 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.

As of the date of this prospectus, Al Plus, Xiao-i Technology and Zhizhen Technology do not have any substantive business operations. As a result of Xiao-I’s indirect ownership in Zhizhen Technology and the variable interest entity contractual arrangements, Xiao-I is regarded as the primary beneficiary of the VIE for accounting purposes. Xiao-I treats the PRC entities as its consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of these entities in Xiao-I’s consolidated financial statements in accordance with U.S. GAAP. For more details and risks related to the variable interest entity structure, please see “Risk Factors — Risks Relating to Our Corporate Structure” on page 52 of this prospectus.

The following diagram illustrates the corporate legal structure of Xiao-I as of the date of this prospectus.

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The following diagram illustrates the ownership of the VIE, Shanghai Xiao-i, as of the date of this prospectus.

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The VIE Agreements

The PRC government regulates the telecommunications and internet industry, including software industry, through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership of PRC companies that engage in software business. Xiao-I, AI Plus and Zhizhen Technology, are considered as foreign invested enterprises. To comply with these regulations, the Company conducts the majority of its activities in PRC through the PRC operating entities. Uncertainties exist as to the Company’s ability to enforce the VIE Agreements, and the VIE Agreements have not been tested in a court of law.

Zhizhen Technology has entered into the following contractual arrangements with Shanghai Xiao-i and 61 of its shareholders, whom together hold 100% equity interest in Shanghai Xiao-i, that enable the Company to (i) have power to direct the activities that most significantly affect the performance of Shanghai Xiao-i and its subsidiaries, and (ii) receive the benefits of Shanghai Xiao-i and its subsidiaries that could be significant to Shanghai Xiao-i and its subsidiaries. The Company, through its indirect wholly owned subsidiary, Zhizhen Technology, is fully and exclusively responsible for the management of Shanghai Xiao-i, absorbs all risk of losses of Shanghai Xiao-i (excluding non-controlling interests) and has the exclusive right to exercise all voting rights of Shanghai Xiao-i’s shareholders. In exchange, Shanghai Xiao-i pays service fees to Zhizhen Technology. 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. Therefore, the Company, through its wholly owned subsidiaries AI Plus and Zhizhen Technology, has been determined to be the primary beneficiary of Shanghai Xiao-i and the VIE’s subsidiaries for accounting purposes and has consolidated Shanghai Xiao-i’s and its subsidiaries’ assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.

Exclusive Call Option Agreement

Pursuant to the Exclusive Call Option Agreement signed on March 29, 2019 by and among Zhizhen Technology, Shanghai Xiao-i and its shareholders, the shareholders irrevocably granted Zhizhen Technology or any third party designated by Zhizhen Technology an option to purchase all or part of their equity interests in Shanghai Xiao-i at any time at a price determined at Zhizhen Technology’s discretion. According to the Exclusive Call Option Agreement, the purchase price to be paid by the Company to each shareholder of Shanghai Xiao-i will be the minimum price permitted by applicable PRC Law at the time when such share transfer occurs. Without Zhizhen Technology’s prior written consent, the shareholders and Shanghai Xiao-i agreed not to, among other things: set encumbrance on, transfer all or part of, or dispose of the equity interests; amend the articles of association of Shanghai Xiao-i; change the registered capital of Shanghai Xiao-i or holding structure; change Shanghai Xiao-i’s business activities; sell, assign, mortgage or dispose of any legal or beneficial rights to or in any of Shanghai Xiao-i’s assets, business, or revenue; incur, assume or guarantee any debts; enter into any material contract; extend any loan or credit to any party, or provide any guarantee or assume any obligation of any party; merge or consolidate with any third party or acquire or invest in any third party; or distribute dividends. The shareholders and Shanghai Xiao-i agreed to manage business and handle financial and commercial affairs prudently and in accordance with relevant laws and codes of practice. 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.

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. Under this agreement, Shanghai Xiao-i appointed Zhizhen Technology to provide exclusive comprehensive business support, technical services, consulting services and other services to Shanghai Xiao-i, and Shanghai Xiao-i agreed to accept such services. The term of the Services provided by Zhizhen Technology shall be 10 years from the effective date of March 29, 2019, and will be automatically extended after the expiration until when terminated in writing by Zhizhen Technology. Additionally, Zhizhen Technology has the full and exclusive right to manage and direct all cash flow and assets of Shanghai Xiao-i and to direct and administrate the financial affairs and daily operation of Shanghai Xiao-i. In exchange, Shanghai Xiao-i pays service fees to Zhizhen Technology. The service fees shall consist of 100% of the profit before tax of Shanghai Xiao-i, after the deduction of all costs,

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expenses, taxes and other fee required under PRC laws and regulations. If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of Zhizhen Technology, the unpaid part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. 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. During the validity term of this agreement, Zhizhen Technology will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries. Zhizhen Technology will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties.

Power of Attorney Agreement

On March 29, 2019, each shareholder of Shanghai Xiao-i, signed the Power of Attorney Agreement to irrevocably entrust Zhizhen Technology or any person(s) designated by Zhizhen Technology to act as its attorney-in-fact to exercise any and all of its rights as a shareholder of Shanghai Xiao-i, including, but not limited to, the right to convene, attend and present the shareholders’ meetings, vote, sign and perform as a shareholder; transfer, pledge or dispose of all the equity interest of Shanghai Xiao-i held by the shareholder; collect the dividend, and participate in litigation procedures. This agreement is effective and irrevocable until all of each shareholder’s equity interest in Shanghai Xiao-i has been transferred to Shanghai Xiao-i or the person(s) designated by Zhizhen Technology.

Share Interest Pledge Agreement

Under the Share Interest Pledge Agreement signed on March 29, 2019 by and among Zhizhen Technology and each shareholder of Shanghai Xiao-i, the shareholders of Shanghai Xiao-i have agreed to pledge 100% equity interest in Shanghai Xiao-i to Zhizhen Technology to guarantee the performance obligations of Shanghai Xiao-i under the Exclusive Business Cooperation Agreement, and the performance obligations of each shareholder under the Exclusive Call Option Agreement. If Shanghai Xiao-i or its shareholders breach their contractual obligations under these agreements, Zhizhen Technology, as pledgee, will have the right to exercise the pledge.

The shareholders also agreed that, without prior written consent of Zhizhen Technology, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests. The pledge of equity interests in Shanghai Xiao-i has been registered with the relevant office of the State Administration for Market Regulation in accordance with the Civil Code of the People’s Republic of China.

Spousal Commitment Letter

The spouses of each individual shareholder of Shanghai Xiao-i have each signed a Commitment Letter. Under the Commitment Letter, the signing spouse unconditionally and irrevocably has agreed to the execution by his or her spouse of the above-mentioned Exclusive Business Cooperation Agreement, Exclusive Call Option Agreement, Power of Attorney Agreement and Share Interest Pledge Agreement, and that his or her spouse may perform, amend or terminate such agreements without his or her consent. 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.

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. 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. 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. 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. 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. Through the VIE agreements, the Company is deemed the

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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 VIE do not have recourse to the Company’s general credit. Accordingly, under U.S. 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. 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. If the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, Xiao-I may have to incur substantial costs and expend additional resources to enforce such arrangements. 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. See “Risk Factors — Risks Relating to Our Corporate Structure” beginning on page 52 of this prospectus for certain risks relating to the contractual arrangements.

Xiao-I is a holding company with no operations of its own. It conducts its operations in China primarily through the PRC operating entities in China. As a result, although other means are available for Xiao-I to obtain financing at the holding company level, Xiao-I’s ability to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and other distributions paid by Xiao-I’s PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such debt may restrict its ability to pay dividends and other distributions to Xiao-I.

In addition, dividends and distributions from Xiao-I’s PRC subsidiaries and the VIE are subject to regulations and restrictions on dividends and payment to parties outside of China. Applicable PRC law permits payment of dividends to Xiao-I by WFOE only out of net income, if any, determined in accordance with PRC accounting standards and regulations. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset by general reserve fund and profits (if general reserve fund is not enough). Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, Xiao-I’s Hong Kong subsidiary is able to transfer cash without any limitation to the Cayman Islands under normal circumstances. 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.

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. As advised by Xiao-I’s PRC counsel, Jingtian & Gongcheng, the Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating entity’s operations. Xiao-I, its subsidiaries or the PRC operating entities have not been notified of any other restriction which could limit the PRC operating entities’ ability to transfer cash among each other. In the future, cash proceeds from overseas financing activities, including this offering, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and then transferred to WFOE via capital contribution or shareholder loans, as the case may be. 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.

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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. If it determines to pay dividends on any of its Ordinary Shares in the future, as a holding company, it will rely on payments made from Shanghai Xiao-i to WFOE, pursuant to the VIE Agreements between them, and the distribution of such payments to Xiao-i Technology from WFOE, and then to AI Plus from Xiao-i Technology, and then to Xiao-I from AI Plus as dividends, unless it receives proceeds from future offerings. See “Prospectus Summary — Transfers of Cash to and from the VIE” on page 26 and “Risk Factors — Risks Relating to Doing Business in China — 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” on page 66 of this prospectus.

Product and Technology Overview

Overall Architecture of Shanghai Xiao-i’s Products and Technologies

The overall architecture of Shanghai Xiao-i’s products and technologies are divided into three layers: (1) infrastructure, (2) aggregation empowerment platform and (3) domain application.

Infrastructure Layer

Shanghai Xiao-i’s infrastructure layer provides the informational support for its products and technologies. Typically built with third-party products and technologies, it integrates the information into the infrastructure layer. 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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Aggregation Empowerment Platform Layer

AI Core Technology Platform — Cognitive Intelligence Artificial Intelligence (CIAI)

Using proprietary intellectual property technologies, Shanghai Xiao-i has independently developed CIAI, its core technology platform. To date, it has 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.

• 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 Shanghai Xiao-i’s vast corpus accumulation of more than ten years, has enabled it to train its intelligent voice technology for end-to-end application across various scenarios in numerous fields. Based on these technologies, it has 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

• Shanghai Xiao-i offers 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. In terms of Optical Character Recognition (“OCR”), it has general OCR and customized OCR for all types of cards, invoice, receipts, tickets, and more. In terms of construction drawing analysis, it applies various capabilities including pattern recognition and computer vision to comprehensively analyze and process Computer Aided Design (“CAD”) drawings, bringing to life standard review capability for construction drawings. Relating to engineering, it provides rapid

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engineering customization through its internally-developed deep learning framework, which is a machine learning algorithm that uses multiple layers to progressively extract higher-level features from the raw input. It also offers model distillation and pruning solutions to meet clients’ model compression requirements. This high performance framework is adaptable to various environments.

• Machine Learning

• Machine learning methods offered by Shanghai Xiao-i include everything from traditional machine learning to the latest deep learning, reinforcement learning (a machine learning training method based on rewarding desired behaviors and/or punishing undesired ones), active learning (a learning algorithm that interactively queries a user or some other information source to label new data points with the desired outputs), transfer learning (reusing elements of a pre-trained model in a new machine learning model), and generative adversarial networks (“GAN”) (a machine learning model in which two neural networks compete with each other to become more accurate in their predictions). These methods are applied across multiple fields such as natural language processing, speech recognition, vision recognition and analysis, and in business scenarios such as precision marketing, personalized recommendation, and risk assessment in combination with massive data and distribution processing algorithms to form an efficient human-computer collaborative learning system.

• Affective Computing

• Deep learning technology is used to recognize, understand, process, and simulate human emotions, so as to realize multi-dimensional and multimodal affective computing capabilities such as text, voice and vision. Shanghai Xiao-i has built affective computing, analysis, and interactive processing capabilities that process real-time perception, intelligent planning, automatic simulation, and this technology has been widely used in various practical business scenarios.

• Data Intelligence and Hyperautomation

• Large-scale machine learning technology mines, analyzes, and processes massive amounts of data, the assets of which are comprehensively integrated to extract information contained therein. Business processes are automatically and quickly identified, reviewed, and executed in combination with innovative technologies such as process automation and low code (which provides a development environment used to create application software through a graphical user interface). The results enable enterprises to delegate simple tasks with high repeatability, as well as complex tasks, to AI and data enhancement, thereby improving the quality and efficiency of business operations. Applications include data monitoring, data analysis, user profiling, business process automation, financing business automation, financial business automation, supply chain business automation, IT operation, and maintenance and integration automation.

Shanghai Xiao-i’s Product Platforms

Shanghai Xiao-i has commercialized its six core technologies to create the following product platforms: (1) Conversational AI, (2) Knowledge Fusion, (3) Intelligence Voice, (4) Hyperautomation, (5) Data Intelligence, (6) Intelligent Construction Support, (7) Vision Analysis, (8) Intelligent Hardware Support, and (9) Metaverse.

• Conversational AI Platform

• Its conversational AI platform makes full use of deep learning, data enhancement, and active learning technologies, employing flexible and diverse dialog management and context processing mechanisms, and driven by a powerful learning system, the results of which achieve in-depth scenario dialog processing, intent recognition, and complex logic reasoning in combination with structured knowledge and semantic analysis capabilities. Additionally, the platform realizes the business value of conversational AI in a variety of application scenarios, including intelligent customer service, smart marketing, intelligent hardware, intelligent assistant, agent assistance, and intelligent human-computer training.

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• Knowledge Fusion Platform

• The knowledge fusion platform integrates various types of knowledge such as Question & Answer (“Q&A”), documents, multimedia, information forms, business processes, knowledge graphs, and multimodal to assist enterprises in improving knowledge management capabilities, building intelligent service cores, supporting intelligent knowledge management, retrieval, recommendation, application assistance, cognitive reasoning, and other capabilities. It helps enterprise-level intelligent applications, improves work efficiency, optimizes user experience, and reduces enterprise operating costs.

• Intelligent Voice Platform

• Shanghai Xiao-i’s intelligent voice platform (“IVP”) uses natural language processing (“NLP”), automatic speech recognition, voiceprint recognition, and text-to-speech technologies with human-computer interaction as its core, in combination with various business scenarios, to comprehensively create or enhance business capabilities such as intelligent speech solutions, thereby realizing the macro processes of intelligent IVP, intelligent outbound calls, speech analysis, agent assistance, and human-computer interaction.

• Hyperautomation Platform

• The hyperautomation platform innovatively uses low code technology in combination with agents to realize and expand vast capabilities of the traditional low code platform and Robotic Process Automation. It integrates technologies such as OCR, NLP, and visualized data mining and analysis, enables users to realize business and process automation, combines capabilities of knowledge base and imitation learning, and enables realization of business and process intelligence with intelligent planning capabilities.

• Data Intelligence Platform

• The data intelligence platform comprehensively integrates data assets, manages the entire life cycle of data, and realizes the entire cycles of data integration, processing, transformation, analysis, and mining through What You See Is What You Get (a system in which editing software allows content to be edited in a form that resembles its appearance when printed or displayed as a finished product) with the support of component-based data visualization technology. It also helps clients extract valuable information contained in data, and provides assistance in business and process automation, business prediction, decision support, among others, and improves the efficiency of data-driven business intelligence and business intelligence services.

• Intelligent Construction Support Platform

• Shanghai Xiao-i’s intelligent construction support platform offers many capabilities such as parsing, reconstruction, visualization, and multi-dimensional analysis of construction drawings. Combined with a variety of construction application scenarios, the platform can realize intelligent construction drawings review, design assistance, online collaborative design, among other applications. It enables the construction industry to reduce the cost of drawing review, improve per-capita energy efficiency, empowers the construction industry value chain, and facilitates the transformation and upgrading of intelligence and automation.

• Vision Analysis Platform

• The vision analysis platform uses a variety of computer vision-related technologies to apply OCR, detection, video, and image analysis, helps clients extract and mine valuable information contained in images, and realizes business automation, industrial defect detection, monitoring analysis, and other innovative applications encountered in specific business scenarios.

• Intelligent Hardware Support Platform

• The intelligent hardware support platform provides the framework of signal collection, processing, analysis, prediction, and more. This framework can be combined with various sensors to quickly process signal, select and adapt appropriate machine learning algorithms for business modeling according to the intelligent requirements of various types of hardware, make full use of various machine learning capabilities to make the equipment be more intelligent.

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• Metaverse Platform

• Shanghai Xiao-i developed the first virtual digital human in 2016 and released it for the first time at the Guiyang Digital Expo in 2017. It continues to innovate and develop more advanced and smarter digital human products. Digital human with multimodal emotional interaction capabilities can be widely used in various business scenarios including film and television production, media, games, financial services, culture, tourism, education, healthcare, and retail.

Domain Application Layer

For more than 20 years, Shanghai Xiao-i has applied its aggregation platform to form a number of mature application fields designed to address the business needs of various fields, including (1) AI + Contact Center, (2) AI + Finance, (3) AI + Urban Public Service, (4) AI + Construction, (5) AI + Metaverse, (6) AI + Manufacturing and (7) AI + Smart Healthcare.

Its technologies are based, in significant part, upon its proprietary intellectual property portfolio. As of December 1, 2022, Shanghai Xiao-i has applied for 554 patents, 281 of which have been granted and it has obtained 225 registered trademarks and 130 computer software copyrights. In June 2020, it passed the national intellectual property management system certification and obtained the certificate. This certificate represents that the company’s intellectual property management system conforms to the GB/T 29490-2013 standard, which is the first national standard for enterprise intellectual property management jointly drafted and formulated by China National Intellectual Property Administration and the China National Institute of Standardization, and jointly approved by the General Administration of Quality Supervision, Inspection and Quarantine of the PRC and Standardization Administration of the PRC. It continues to develop and improve its intellectual property portfolio through its in-depth Research and Development (“R&D”) department. As of December 1, 2022, it has 277 R&D personnel, accounting for about 62.5% of its personnel, including 189 with Bachelor’s degrees, 23 with Master’s degrees and 5 with Doctorates. Its primary services are software services. Software services refer to the sales of software products corresponding to the Company’s obtained patents or software copyrights to customers for meeting the needs of different customers in different industries for artificial intelligence:

(1) Contact Center: Shanghai Xiao-i leverages contact center AI solutions to improve customer experience and operational efficiency. It offers AI-based platforms, software tools and services that leverage voice-based assistants to facilitate strong interactions and engagement in different industries, including both small and medium enterprises and large enterprises.

(2) Architectural Design AI services Shanghai Xiao-i provides professional architectural drawing review solutions. By using computer vision, natural language processing technology and its unique map, image morphology processing, pattern recognition, image segmentation, image target detection, path planning, OCR and many other independent research and development technologies, combined with the rich professional experience in architectural design, it has launched AI products for blueprint review to achieve automation and intelligence, enabling the architecture industry to reduce the cost of reviewing blueprints, improving the efficiency, and cross-institution collaborative drawing review.

(3) Smart City Shanghai Xiao-i uses natural language processing, data intelligence and other technologies to build a cognitive brain for smart city public services, and continuously improves the level of urban intelligence from social service efficiency and public experience. It provides solutions such as smart city service hotline, smart public service and smart legal services.

The PRC operating entities generate revenue primarily from the (i) sale of software products and service, (ii) maintenance and support (“M&S”) service, and (iii) sale of cloud platform products. For the years ended December 31, 2020 and 2021, and for the six months ended June 30, 2021 and 2022, their total revenue was US$13.86 million, US$32.52 million, US$8.9 million, and US$12.9 million, respectively.

1. Their software products sold to customers comprising customized software products for specific needs. The revenue from sales of software products increased by 109.9% from US$11.50 million for the year ended December 31, 2020 to US$24.14 million for the year ended December 31, 2021, primarily due to two major contracts signed in 2021, providing smart graphic review software products amounted to US$11.88 million and technical services amounted to US$1.51 million, respectively. The revenue from sales of software products increased by 57.8% from US$4.88 million for the six months ended June 30,

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2021 to US$7.69 million for the six months ended June 30, 2022, primarily due to two major contracts providing technical services amounted to US$3.37 million and software products sales amounted to US$1.19 million, respectively.

2. They provide M&S services for software products contracts which consist of future software updates, upgrades, and enhancements as well as technical product support services, and the provision of updates and upgrades on a when-and-if-available basis. The revenue from sales of M&S service increased by 43.1% from US$1.94 million for the year ended December 31, 2020 to US$2.78 million for the year ended December 31, 2021, primarily due to more residence service provided to customers in 2021. The revenue from sales of M&S service increased by 4.6% from US$1.43 million for the six months ended June 30, 2021 to US$1.50 million for the six months ended June 30, 2022, primarily due to a slight increase of price per service provided to customers in 2022.

3. Their cloud platform products, which is a newly established revenue stream in 2021, consist of standardized software products uploaded to their cloud platform. The revenue from sales of cloud platform products increased from nil for the year ended December 31, 2020 to US$5.53 million for the year ended December 31, 2021. The revenue from sales of cloud platform products increased by 44.5% from US$2.53 million for the six months ended June 30, 2021 to US$3.65 million for the six months ended June 30, 2022, primarily due to increased number of customers attracted by the flexibility and mobility of cloud platform products.

They sell their products and services to end customers through their sales ecosystem. Sales to customers in Mainland China accounted for approximately 88.3% and 97.7% of their total revenue in the fiscal years 2020 and 2021, and 96.1% and 99.3% for the six months ended June 30, 2021 and 2022, respectively.

Sales to customers in Hong Kong, Macao, Taiwan and other countries accounted for approximately 11.7% and 2.3% of their total revenue in the fiscal years 2020 and 2021, and 3.9% and 0.7% for the six months ended June 30, 2021 and 2022, respectively.

Shanghai Xiao-i’s Competitive Advantages

Shanghai Xiao-i believes it has the following competitive advantages and they distinguish Shanghai Xiao-i from its competitors:

Its Pioneer Position in AI Technology and Focus on Research and Development (“R&D”)

• It believes that it pioneered the industry’s first cognitive intelligence and narrow artificial intelligence technology and have built on its culture of innovation.

• Since its establishment in 2001, Shanghai 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. As a leading AI technology and industrialization service platform in China, through years of operation, it has established cooperation with many leading companies amongst various industry verticals according to Frost & Sullivan. Its industry leadership is built on its pioneering research to commercialize AI technology.

• Its first-mover advantage in natural language processing has made it a pioneer in formulating AI industry standards and creating more than 500 patents granted or pending. To protect its technology, in June 2012, Shanghai Xiao-i sued Apple Computer Trading (Shanghai) Co., Ltd., a subsidiary of Apple, Inc., for patent infringement and received the Supreme People’s Court Supreme Court Administrative Judgment, a final judgement, confirming the validity of Shanghai Xiao-i’s patent in June 2020, but did not make a ruling on whether Apple infringed its patent. Specifically, according to the Patent Administration (Patent) Retrial Administrative Judgment issued by the Supreme People’s Court of China ((2017) ZGFXZ No. 34), in the retrial case of Shanghai Xiao-i and Apple Computer Trading (Shanghai) Co., Ltd. and the China National Intellectual Property Administration, the Supreme People’s Court determined that the invention patent named “A Chatbot System (Patent No.: 200410053749.9)” held by Shanghai Xiao-i is a valid patent. On August 3, 2020, after obtaining the final judgment confirming the validity of its patent, Shanghai Xiao-i filed another infringement lawsuit against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading (Shanghai) Co., Ltd. (together, “Apple”), demanding Apple to stop the infringement and compensate for the losses. As of the date of this prospectus, the case is still pending. See “Legal Proceedings on page 131 for details.”

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• Shanghai Xiao-i is a pioneer in AI + with over 20 years of development and innovation with 4 R&D centers, 280+ engineers, 50+ external experts, and 10+ university partners.

Advantages of Shanghai Xiao-i’s Products and Services

• It develops and commercializes Metaverse-related offerings, including Virtual Humans, Artificial Reality (“AR”) and Virtual Reality (“VR”).

• It helps its clients with their digital transformation using its cognitive intelligence and AI technologies.

• It enables its customers to reap economies of scale by providing one-stop shop service from its extensive network of service hubs in their vicinity.

• Its deep-rooted attention to quality assurance in its product and service offerings puts it ahead of its competitors.

• It has a proven monetization model based on product differentiation, revenue source diversification, and customer loyalty.

• Its products and services meet the needs of different customers and it maintains frequent client engagement for continuous business development and customer loyalty cultivation.

• While its customer contracts vary, they generally represent multi-year engagements, giving it visibility into future revenue. It has master similar commercial arrangements in place with many of its customers, retaining customers over the long term.

Shanghai Xiao-i’s Robust Ecosystem of Partnerships

• It has various regional sales teams, including Shanghai, Beijing and Hong Kong.

• It maintains good relationships with suppliers that have a good record of performance.

• Its products cover large and medium-sized contact centers, financial institutions, communication operators, government services, industrial manufacturing, healthcare, and other customer groups.

• It builds strong and long-standing customer relationships with large enterprises in China. Its client list includes nearly all the industry giants in the banking and telecom industries in China.

Shanghai Xiao-i’s Visionary and Seasoned Management

• Its CEO Mr. Hui Yuan is a recognized AI industry Key Opinion Leader and domain expert.

• Shanghai Xiao-i’s team has deep technical expertise and proven track record of constant innovation.

• Shanghai Xiao-i has proven ability to attract and retain highly qualified talent.

Shanghai Xiao-i’s Growth Strategy

It intends to further grow its business by pursuing the following strategies:

• Continue to improve cognitive technology capability. It has set up a technology research institute to conduct in-depth communication on technological innovation with experts and scholars from top universities, such as Duke University, Hong Kong University of science and technology and Columbia University. It has also carried out in-depth cooperation with well-known domestic universities to jointly develop the latest and cutting-edge technologies.

• Further develop and create long-term sustainable commercialization opportunities through technology innovation, application combination innovation, and AI product diversification. For example, its commercialization in the field of intelligent drawing review has met the needs of the construction industry for drawing review through its artificial intelligence technology.

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• Further strengthen the leading position in the metaverse related products. It began to design and produce a virtual human in 2016. Its first mover advantage in the metaverse will help it continue to succeed in this field.

• Expand its customer base and make full use of existing customers through market segmentation and personalization. It will gradually expand its target customers from the previous major customers to small and medium-sized customers, to provide services for a wider range of customer groups.

• Increase hardware products. As a company mainly engaged in software sales and services, it will increase integrated software and hardware products in the future.

• Further expand its global footprint strategically. The goal of the company is to become a global artificial intelligence enterprise. After the completion of this offering, it is committed to internationalizing its products and services and providing high-quality products and services to customers around the world.

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. Xiao-I, through its indirect wholly owned subsidiary, Zhizhen Technology, has signed various agreements with the VIE and shareholders of the VIE to allow the transfer of economic benefits from the VIE to Zhizhen Technology and to direct the activities of the VIE. Total assets and liabilities presented on Xiao-I’s consolidated balance sheets and revenue, expense, net income presented on consolidated statement of operations and comprehensive income as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows are the financial position, operation and cash flow of the PRC operating entities (excluding non-controlling interests). The Company has not provided any financial support to the PRC operating entities for the fiscal years ended at December 31, 2020, 2021 and for the six months ended June 30, 2022, and the variable interest entities accounted for an aggregate of 100%, 100%, and 95% of the Company’s total assets and total liabilities, respectively. As of December 31, 2020, 2021 and June 30, 2022, $697,798 and $1,254,528 and $1,472,555 of cash, cash equivalents and restricted cash 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. 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 and statements of cash flows with intercompany transactions eliminated:

	As of December 31, 2020
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	1,105	365,756	—	4	—	366,865
Restricted cash	—	460,164	—	—	—	460,164
Accounts receivable, net	—	8,052,564	—	—	—	8,052,564
Amounts due from related parties	—	23,072	—	—	—	23,072
Inventories, net	—	273,364	—	—	—	273,364
Contract costs	—	1,067,289	—	—	—	1,067,289
Prepaid expenses and other current assets, net	4	1,848,404	—	—	—	1,848,408
Total current assets	1,109	12,090,613	—	4	—	12,091,726

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	As of December 31, 2020
Condensed Consolidating Schedule of Financial Position	Parent		VIE and its consolidated subsidiaries		WFOE		Other Subsidiaries	Elimination Adjustments		Consolidated Total
	(in U.S. dollars)
Non-current assets:
Property and equipment, net	—		236,499		—		—	—		236,499
Intangible assets, net	—		886,479		—		—	—		886,479
Long-term investment	—		482,463		—		—	—		482,463
Right of use assets	—		2,250,351		—		—	—		2,250,351
Deferred tax assets, net	—		5,320,284		—		—	—		5,320,284
Prepaid expenses and other, non-current assets	—		3,909,726		—		—	—		3,909,726
Total non-current assets	—		13,085,802		—		—	—		13,085,802
TOTAL ASSETS	1,109		25,176,415		—		4	—		25,177,528

Liabilities
Current liabilities:
Short-term borrowings	—		13,923,372		—		—	—		13,923,372
Accounts payable	—		2,187,810		—		—	—		2,187,810
Amount due to related parties-current	—		540,778		—		—	—		540,778
Deferred revenue	—		1,926,373		—		—	—		1,926,373
Accrued liabilities and other current liabilities	—		5,872,347		—		4	—		5,872,351
Lease liabilities, current	—		1,310,634		—		—	—		1,310,634
Deficit of VIE and VIE’s subsidiaries absorbed by WFOE	—		—		3,808,481		—	(3,808,481	)	—
Investment deficit in subsidiaries	3,808,481		—		—		—	(3,808,481	)	—
Total current liabilities	3,808,481		25,761,314		3,808,481		4	(7,616,962	)	25,761,318

Non-current liabilities:
Accrued liabilities, non-current	—		5,038,643		—		—	—		5,038,643
Lease liabilities, non-current	—		1,007,939		—		—	—		1,007,939
Total non-current liabilities	—		6,046,582		—		—	—		6,046,582
TOTAL LIABILITIES	3,808,481		31,807,896		3,808,481		4	(7,616,962	)	31,807,900

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	(76,262,434	)	(76,262,434	)	(3,808,481	)	—	80,070,915		(76,262,434	)
Accumulated other comprehensive loss	(3,404,824	)	(3,404,827	)	—		—	3,404,827		(3,404,824	)
XIAO-I CORPORATION shareholders’ deficit	(3,807,372	)	(3,808,481	)	(3,808,481	)	—	7,616,962		(3,807,372	)
Non-controlling interests	—		(2,823,000	)	—		—	—		(2,823,000	)
Total shareholders’ deficit	(3,807,372	)	(6,631,481	)	(3,808,481	)	—	7,616,962		(6,630,372	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	1,109		25,176,415		—		4	—		25,177,528

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	For the year ended December 31, 2020
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	—		13,856,734		—		—	—	13,856,734
Cost of revenues	—		(7,228,046	)	—		—	—	(7,228,046	)
Gross profit	—		6,628,688		—		—	—	6,628,688
Operating expenses	—		(14,498,268	)	—		—	—	(14,498,268	)
Loss of VIE and VIE’s subsidiaries absorbed by WFOE	—		—		(6,808,365	)	—	6,808,365	—
Share of loss in subsidiaries	(6,808,365	)	—		—		—	6,808,365	—
Total operating expenses	(6,808,365	)	(14,498,268	)	(6,808,365	)	—	13,616,730	(14,498,268	)
Loss from operations	(6,808,365	)	(7,869,580	)	(6,808,365	)	—	13,616,730	(7,869,580	)
Other income	—		577,684		—		—	—	577,684
Income tax benefits	—		235,854		—		—	—	235,854
Net loss	(6,808,365<