Company: XTIA
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032213
Chunk: 103

Company: XTI Aerospace, Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 1
Chunk 103
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 it involved complex and subjective judgments by management.

F-2

How the Critical Audit Matter Was Addressed
in the Audit

Our audit procedures related to goodwill impairments
include the following, among others:

●We
obtained an understanding of the Company’s process for identifying and evaluating potential goodwill impairment and reviewed the
methodologies used for impairment testing.

●We evaluated the appropriateness of the valuation
models used by the Company, including the discounted cash flow model, and verified its mathematical accuracy.

●We assessed the Company’s valuation model,
including key assumptions, estimates, and sensitivity analysis.

●We assessed the reasonableness of key assumptions
and estimates used by the Company in their valuation models, including growth rates, discount rates, long-term growth rates, and revenue
projections.

●We reviewed the sensitivity analyses performed
by the Company to understand how changes in key assumptions could impact the fair value conclusions.

●We reviewed the disclosures in the financial
statements related to goodwill impairment to ensure adequacy and compliance with accounting standards.

Business Combination

The Company completed a significant business combination
during the year. Accounting for this business combination involved significant judgment and estimation by management, particularly in
determining the fair value of identifiable intangible assets and liabilities acquired, as well as the resulting goodwill. The Company
used various valuation models and engaged third-party specialists to assist in these valuations. Given the complexity and judgment involved
in accounting for the business combination, we identified the evaluation of the business combination as a critical audit matter. This
involved significant audit effort and the use of professionals with specialized skills and knowledge.

How the Critical Audit Matter Was Addressed
in the Audit

Our audit procedures related to business combination include the following,
among others:

●We obtained an understanding of the terms and
conditions of the business combination by reviewing the purchase agreement and other related documents.

●We evaluated the appropriateness of the valuation
methodologies used by management to determine the fair value of the identifiable assets acquired and liabilities assumed. This included
reviewing the discounted cash flow models, market approach, and cost approach used for the valuation.

●We tested the completeness and accuracy of the
purchase price allocation by verifying the consideration transferred.

●We involved our valuation specialists to assist
in assessing the methodologies and assumptions used by management in the fair value measurements of the acquired intangible assets.

●We
reviewed the disclosures in the financial statements related to the business combination to ensure adequacy and compliance with accounting
standards.

/s/