Company: XTIA
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032213
Chunk: 559

Company: XTI Aerospace, Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 8
Chunk 559
---
 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 milestone
contracts are accounted for using the