Company: XTIA
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001213900-25-076767
Chunk: 69

Company: XTI Aerospace, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 69
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stock is one of the qualitative factors to be considered as part of an impairment test when evaluating whether events or changes in circumstances
may indicate that it is more likely than not that a potential goodwill impairment exists. We will continue monitoring the analysis of
the qualitative and quantitative factors used as a basis for the goodwill impairment test during fiscal year 2025 and at the Company’s
October 1st annual testing date. As of June 30, 2025, management evaluated potential triggers and determined there was a triggering event
during the six months ended June 30, 2025 relating to the Industrial IoT reporting unit, in the form of a current period operating and
cash flow loss, a consistent history of operating losses, and the revenue results for the current period missing forecasted targets due
to (i) the sales cycle to close transactions taking longer than anticipated, and (ii) supply chain issues causing delays in our delivery
of Nanotron product to customers. As such, the Company completed a qualitative assessment and determined in the aggregate, it is more
likely than not, that the fair value of the IoT reporting unit is less than its carrying value. Therefore, a goodwill impairment of $4.05
million was recognized for the three and six months ended June 30, 2025. One of the key factors in the calculation of the impairment amount
is the Company’s forecasted financial performance for the IoT reporting unit. If the projected revenues decreased by 10%, the goodwill
impairment amount would have increased by $2.9 million.

40

Components of Results of Operations

Revenue

Commercial Aviation

We are still working to design,
develop and certify the TriFan 600 airplane and thus have not generated revenue from this segment. We do not expect to begin generating
significant revenues until we complete the design, development, certification, and manufacturing of the airplane.

Industrial IoT

Our RTLS products are primarily
sold on a license and SaaS mode, which we call “location as a service” or “LaaS.” In our licensing model, we also
typically charge an annual maintenance fee. The LaaS model is typically for a 3-5 year contract and includes a license to use, maintenance
and hardware upgrades. The LaaS model generates a recurring revenue stream.

Operating Expenses

Research and Development

Research and development activities
represent a significant part of our business. Our research and development efforts focus on the design and development of (i) our indoor
intelligence products, and (