Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 76

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 1
Chunk 76
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 during the three months ended September 30, 2025 relating to the Industrial
IoT reporting unit.

As of June 30, 2025, management
evaluated potential triggers and determined there was a triggering event during the three 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 during the second quarter of 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. This estimate is subject to
significant uncertainty due to the potential for volatile financial market conditions.

42

Components of Results of Operations

Revenue

Commercial Aviation

We continue 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 (ii) our TriFan 600 airplane, including certain of the systems that will be used in it. As
part of our aircraft development activities, we continue to work closely with the FAA towards our goal of achieving certification of
our TriFan