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Xiao-I Corporation 6-K Report: New $4.6M Convertible Notes Financing Explained

$AIXI
Form 6-K
Filed on: 2025-01-10
Source
Xiao-I Corporation 6-K Report: New $4.6M Convertible Notes Financing Explained

Here are the key insights extracted from the financial report of Xiao-I Corporation as outlined in the 6-K filing:

  1. Company Overview:
  • Name: Xiao-I Corporation
  • Location: 5/F, Building 2, No. 2570 Hechuan Road, Minhang District, Shanghai, China 201101.
  • Commission File Number: 001-41631.
  • Report Date: January 10, 2025 (for transactions dated January 6, 2025).
  1. Material Definitive Agreement:
  • The Company entered into two Securities Purchase Agreements (SPAs) with institutional investors.
  • The transaction involves the issuance of two convertible promissory notes totaling $4,637,840:
    • Initial Principal Amount: $4,295,000
    • Original Issue Discount: $342,840 (to be added after 30 days).
  • The notes bear an 8% Original Issue Discount and are convertible into American Depositary Shares (ADS), where each ADS represents three ordinary shares.
  1. Conversion Terms:
  • The notes will mature 12 months after the purchase date.
  • Conversion price is the lower of:
    • Fixed Price: $7.201
    • Market Price: 85% of the lowest volume-weighted average price of the ADSs over the preceding ten trading days.
  • The conversion price will be adjusted by $0.05 per ADS for issuance fees.
  1. Interest Rate:
  • The notes carry an interest rate of 6% per annum, which will increase to 18% upon an event of default.
  1. Prepayment Options:
  • The Company may prepay the notes with a ten-trading-days advance written notice.
  • Prepayment terms:
    • 101% of the outstanding balance if paid within 30 days.
    • 110% thereafter, with no prepayment premium for balances under $100,000.
  1. Default and Trigger Events:
  • The notes include several Trigger Events that could escalate to an Event of Default if not cured within ten days, leading to acceleration of the outstanding balance and increased interest rates.
  • Examples of Trigger Events include failure to pay amounts due, insolvency, and breaches of covenants.
  1. Security and Ranking:
  • The notes are unsecured and rank pari passu with other obligations of the Company.
  1. Beneficial Ownership Limitation:
  • Conversions are restricted if they would result in the holder owning more than 9.99% of the outstanding ADSs.
  1. Regulatory Compliance:
  • The transaction was conducted under an exemption from securities registration per the Securities Act of 1933.
  • A prospectus supplement detailing the offering will be filed with the SEC.
  1. Exhibits:
    • The filing includes forms of the convertible promissory notes and the SPA as exhibits.

This report highlights a significant financing initiative by Xiao-I Corporation through convertible notes, indicating ongoing capital needs and strategic partnerships with investors. The terms outline the conditions under which the company can convert debt to equity, reflecting its approach to managing financial leverage and investor relations.