Company: XTIA
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032213
Chunk: 303

Company: XTI Aerospace, Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 2
Chunk 303
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2023 which are included elsewhere in this Annual Report on Form 10-K. We believe that the following accounting estimates
are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult,
subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
There have been no changes to estimates during the periods presented in the filing. Historically changes in management estimates have
not been material.

42

Revenue
Recognition

The
Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects
the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from
software as a service, design and implementation services for its Indoor Intelligence systems, and professional services for work performed
in conjunction with its systems.

Our
contracts with customers often include promises to transfer multiple distinct products and services. Our licenses are sold as perpetual
or term licenses and the arrangements typically contain various combinations of maintenance and professional services, which are accounted
for as separate performance obligations. In determining how revenue should be recognized, a five-step process is used, which requires
judgment and estimates within the revenue recognition process. The most critical judgements required in applying Accounting Standards
Codification (“ASC”) 606 Revenue Recognition from Customers, and our revenue recognition policy relate to the determination
of distinct performance obligations.

●We
                                            receive fixed consideration for sales of hardware and software products. Revenue is recognized
                                            at point in time when the customer has title to the product and risks and rewards of ownership
                                            have transferred.

●Revenue
                                            related to software as a service contract is recognized over time using the output method
                                            (days of software provided) because we are providing continuous access to its service.

●Design
                                            and implementation revenue is accounted for using the 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. Accounting for these contracts involves the use of estimates to determine total
                                            contract costs to be incurred.

●Professional
                                            services revenue under fixed fee contracts is recognized over time using the input method
                                            (direct labor hours) to recognize revenue over the term of the contract. We have elected
                                            the practical expedient to recognize revenue for the right to invoice because our right to
                                            consideration corresponds