Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 319

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 2
Chunk 319
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 attributable to a $0.9 million increase in hardware revenue related to the Company’s IoT business, resulting
from improved supply chain conditions. These improvements followed the resolution of disruptions caused by regional conflict in the Middle
East, which had impacted operations of the Company’s Israeli supplier and resulted in delays in hardware product deliveries during
the first half of 2025. In addition, we communicated our plan to explore our strategic options to wind down and/or sell the hardware
portions of our Industrial IoT business to our customers which resulted in customers increasing their hardware purchases, and as a result,
we do not expect this trend to continue. In addition, recurring software revenue increased by $0.4 million due to existing IoT customers
adding new locations to their contracts.

45

Cost of Revenues and Gross Profit

Cost of revenues for the nine
months ended September 30, 2025 was $1.7 million compared to $0.8 million for the comparable period in the prior year.

Gross profit for the nine
months ended September 30, 2025 and 2024 was $1.9 million and $1.3 million, respectively. The gross margin percentage was 53% and
61% for the nine months ended September 30, 2025 and 2024, respectively. The margin decrease is due primarily to a shift in sales mix
to lower margin hardware products during the first nine months of 2025.

Operating Expenses

Operating expenses for the
nine months ended September 30, 2025 were $38.2 million, compared to $28.3 million for the nine months ended September 30, 2024, an increase
of $9.9 million. We expect operating expenses to continue to increase as we increase our headcount to accommodate our growth. The increase
was primarily attributable to:

●Research
                                            and development expenses, which increased by $2.8 million, primarily related to continued
                                            development of the TriFan 600 program.

●Sales
                                            and marketing expenses, which increased by $3.1 million, as the Company expanded
                                            investments in brand development and awareness, trade show participation, and business development
                                            initiatives.

●Non-cash
                                            impairment charges, which increased by $4.7 million, relating to goodwill and intangible
                                            assets within the Industrial IoT segment.

●General
                                            and administrative expenses, which increased by $6.0 million, primarily due to higher
                                            legal and accounting fees associated with