Company: XTIA
Filing Date: 2025-05-19
Form Type: 10-Q
Source: 0001213900-25-045396
Chunk: 112

Company: XTI Aerospace, Inc.
Filing Date: 2025-05-19
Form: 10-Q
Item: Part I, Item 8
Chunk 112
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 those goods. To determine revenue recognition
for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify
the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including
variable consideration, if any, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize
revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it
is probable that it will collect the consideration to which it is entitled in exchange for the goods it transfers to a customer.

Hardware and Software Revenue Recognition

For sales of hardware and software products, the
Company’s performance obligation is satisfied at a point in time when they are shipped to the customer, at which control is deemed
transferred to the customer, and has title of the product and holds the risks and rewards of ownership.

The Company leverages drop-ship arrangements with
many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In
such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears
credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that
such product meets the standards and requirements of the customer. Accordingly, the Company concluded it is the principal in the transaction
with the customer and records revenue on a gross basis. The Company receives fixed consideration for sales of hardware and software products.
The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected
the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset
that otherwise would have been recognized is less than a year.

Software As A Service Revenue Recognition

With respect to sales of the Company’s maintenance,
consulting and other service agreements, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s
performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout
the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing
continuous access to its service.

Professional Services Revenue Recognition

The Company’s professional services include
milestone, fixed fee and time and materials contracts. Professional services under