Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 402

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 3
Chunk 402
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 products.

In addition, under the 2025 National Defense Authorization
Act (“NDAA”), a U.S. national-security agency is required to complete a security review of certain suppliers, including DJI,
by December 23, 2025. If no agency completes this review by the deadline, the law instructs the Federal Communications Commission (the
“FCC”) to automatically add these suppliers to the FCC “Covered List,” which would effectively block new FCC equipment
authorizations for their technology and drones in the U.S. (i.e., new models could not be approved).

Drone Nerds relies on DJI for a significant portion
of its drone sales, creating significant regulatory and operational risk. Also, in September 2025, Drone Nerds signed an additional one-year
contract with DJI to be the official non-exclusive dealer of its products in the U.S. DJI is already listed on certain U.S. government
watchlists for national security and data concerns, which could restrict imports and limit access to government or defense-related contracts.
This dependence exposes Drone Nerds to potential supply disruptions.

In addition, while existing FCC equipment authorizations
for previously approved DJI products would remain valid, federal agencies have indicated that continued use of legacy or in-service DJI
equipment may become restricted or phased out over time. Such actions could include procurement bans, limits on participation in government-funded
projects, or heightened data-security and export-control scrutiny. Even absent formal revocation of existing approvals, these measures
could discourage public-sector or enterprise customers from purchasing or deploying DJI-based systems, thereby reducing demand for Drone
Nerds’ products.

Although the NDAA establishes the deadline for
the national-security review, the ongoing federal government shutdown has created uncertainty around whether agencies will complete the
review on time. Many federal departments responsible for technology and security evaluations are operating with reduced staffing or suspended
programs, which may delay interagency coordination and risk assessments. If the review is not completed by the statutory deadline, DJI
and other covered suppliers would be automatically added to the FCC Covered List by operation of law. This outcome—caused indirectly
by administrative delay—could occur even without any final security determination.

If regulatory developments, including delayed
or adverse NDAA determinations, restrict DJI’s market access, Drone Nerds may be forced to renegotiate or terminate this agreement,
seek alternative suppliers, or incur substantial transition costs. Failure to diversify its supply base or mitigate these risks could
materially and adversely