Company: XTIA
Filing Date: 2025-05-19
Form Type: 10-Q
Source: 0001213900-25-045396
Chunk: 156

Company: XTI Aerospace, Inc.
Filing Date: 2025-05-19
Form: 10-Q
Item: Part I, Item 8
Chunk 156
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 business or for
other reasons could result in the recognition of impairment losses higher than the amount currently recorded.

For assets to be held and
used, including acquired intangible assets subject to amortization, we initiate our review whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be recoverable. Recoverability of an asset is measured by comparison of its
carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized
is measured by the amount by which the carrying amount of the asset exceeds its fair value. Significant management judgment is required
in this process.

For intangible assets not
subject to amortization such as goodwill, we test for impairment annually, or whenever events or changes in circumstances indicate that
their carrying value may not be recoverable. In testing goodwill for impairment, we compare the fair value with the carrying value. The
determination of fair value is based on a discounted cash flow analysis, using inputs and assumptions such as revenue growth rates, other
projected expenses, and discount rates. If we were to experience a decrease in forecasted future revenues attributable to the intangible
assets, this could indicate a potential impairment. If the carrying value exceeds the estimated fair value, the goodwill is considered
impaired, and an impairment loss will be recognized in an amount equal to the excess of the carrying value over the fair value of goodwill.

We will perform our annual
goodwill impairment test required by ASC 350 as of October 1st of each year. In testing goodwill for impairment, we analyze
qualitative factors as stated within ASC 350 to determine if the fair value of our reporting unit may be less than the carrying value
of the reporting unit. We have one reporting unit that carries goodwill (Industrial IoT). If the fair value of the reporting unit, based
on qualitative factors, may be less than the carrying value of the reporting unit, we then perform the goodwill impairment test required
under ASC 350 by comparing the fair value of the reporting unit with the carrying value of the reporting unit and, if the fair value is
less than the carrying value, the amount that the carrying value exceeds fair value represents the amount of goodwill impairment. Accordingly,
we would recognize an impairment loss in the amount of such excess.

In connection with the XTI
Merger we recorded $12 million in goodwill which was allocated to our Industrial IOT reporting unit. Since the closing date of the Merger
on March