Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 243

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 243
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ountered by companies in rapidly evolving markets could impact our ability to do the following in connection with our acquisition of
Drone Nerds:

●Generate
sufficient revenue to maintain its historical profitability;

●Acquire
and maintain market share;

●Achieve
or manage growth in our business operations;

●Renew
contracts;

54

●Successfully
stock for the commercial market products and end-to-end solutions;

●Adapt
to new or changing polices and spending priorities of current and prospective clients; and

●Access
to additional financing or capital when required and on reasonable terms.

If we fail to address these
and other challenges, risks and uncertainties successfully, our business, results of operations and financial condition would be materially
harmed.

The supplier base of Drone Nerds is highly
concentrated. In addition, Drone Nerds is subject to risks arising from ongoing regulatory discussions and potential legislative actions
targeting its primary supplier from China, SZ DJI Technology Co, Ltd. and affiliates (“DJI”), who represented a majority of
Drone Nerds’ vendor purchases during the 1H 2025.

Drone Nerds has relationships with various global
suppliers of drones and electronics, however the top 1 2 and 3 suppliers represent 53%, 10% and 7% of purchases, respectively, for the
six months ended June 30, 2025. If any of those suppliers decided to no longer work with Drone Nerds, this could impact Drone Nerds ability
to source products.

In addition, under the 2025 National Defense Authorization
Act (“NDAA”), a U.S. national-security agency is required to complete a security review of certain suppliers, including DJI,
by December 23, 2025. If no agency completes this review by the deadline, the law instructs the Federal Communications Commission (the
“FCC”) to automatically add these suppliers to the FCC “Covered 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