Company: XTIA
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032213
Chunk: 560

Company: XTI Aerospace, Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 8
Chunk 560
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 percentage of completion method. As soon as the outcome of a contract can be estimated reliably,
contract revenue is recognized in the consolidated statement of operations in proportion to the stage of completion of the contract.
Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable
to contract activity, and are specifically chargeable to the customer under the terms of the contract.

Contract
Balances

The
timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable
when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes
the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied, principally
within one year.

F-15

XTI
AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Customer
Deposits

The Company periodically enters into aircraft reservation agreements
that include a deposit placed by a potential customer. The deposits serve to prioritize orders when the TriFan 600 airplane becomes available
for delivery. Customers making deposits are not obligated to purchase any airplanes until they execute a definitive purchase agreement.
Customers may request return of their deposit any time up until the execution of a purchase agreement. The Company records such advance
deposits as a liability and defers the related revenue recognition until delivery of an airplane occurs, if any.

Stock-Based
Compensation

The
Company’s stock-based compensation relates to stock options granted to employees and non-employees. The Company recognizes the
cost of share-based awards granted to employees and non-employees based on the estimated grant-date fair value of the awards. Forfeitures
are accounted for as they occur, which may result in negative expense when forfeitures exceed the expense recorded within the period.

The
Company recognizes expense on a straight-line basis over the requisite service period of the award, which is generally equal to the vesting
period of the award.

The
Company estimates the grant-date fair value of the stock option awards with service only vesting conditions using the Black-Scholes option-pricing
model.

The
Black-Scholes option-pricing model utilizes inputs and assumptions which involve inherent uncertainties and generally require significant
judgment. As a result, if factors or expected outcomes change and significantly different assumptions or