Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 592

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part II, Item 1A
Chunk 592
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 List,” which would effectively block new FCC equipment
authorizations for their technology and drones in the U.S. (i.e., new models could not be approved).

Drone Nerds relies on DJI for a significant portion
of its drone sales, creating significant regulatory and operational risk. Also, in September 2025, Drone Nerds signed an additional one-year
contract with DJI to be the official non-exclusive dealer of its products in the U.S. DJI is already listed on certain U.S. government
watchlists for national security and data concerns, which could restrict imports and limit access to government or defense-related contracts.
This dependence exposes Drone Nerds to potential supply disruptions.

In addition, while existing FCC equipment authorizations
for previously approved DJI products would remain valid, federal agencies have indicated that continued use of legacy or in-service DJI
equipment may become restricted or phased out over time. Such actions could include procurement bans, limits on participation in government-funded
projects, or heightened data-security and export-control scrutiny. Even absent formal revocation of existing approvals, these measures
could discourage public-sector or enterprise customers from purchasing or deploying DJI-based systems, thereby reducing demand for Drone
Nerds’ products.

Although the NDAA establishes the deadline for
the national-security review, the ongoing federal government shutdown has created uncertainty around whether agencies will complete the
review on time. Many federal departments responsible for technology and security evaluations are operating with reduced staffing or suspended
programs, which may delay interagency coordination and risk assessments. If the review is not completed by the statutory deadline, DJI
and other covered suppliers would be automatically added to the FCC Covered List by operation of law. This outcome—caused indirectly
by administrative delay—could occur even without any final security determination.

If regulatory developments, including delayed
or adverse NDAA determinations, restrict DJI’s market access, Drone Nerds may be forced to renegotiate or terminate this agreement,
seek alternative suppliers, or incur substantial transition costs. Failure to diversify its supply base or mitigate these risks could
materially and adversely affect Drone Nerds’ business, financial condition, and operating results.

The nature of the Drone Nerds business involves
significant risks and uncertainties that may not be covered by insurance or indemnification.

Drone Nerds has developed and sold products and
services in circumstances where insurance or indemnification may not be available, for example, in connection with the collection and
analysis of various types of information. In addition, its products and