Company: XTIA
Filing Date: 2025-05-19
Form Type: 10-Q
Source: 0001213900-25-045396
Chunk: 211

Company: XTI Aerospace, Inc.
Filing Date: 2025-05-19
Form: 10-Q
Item: Part I, Item 2
Chunk 211
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 were to experience a decrease in forecasted future revenues attributable to the intangible
assets, this could indicate a potential impairment. If the carrying value exceeds the estimated fair value, the goodwill is considered
impaired, and an impairment loss will be recognized in an amount equal to the excess of the carrying value over the fair value of goodwill.

We will perform our annual
goodwill impairment test required by ASC 350 as of October 1st of each year. In testing goodwill for impairment, we analyze
qualitative factors as stated within ASC 350 to determine if the fair value of our reporting unit may be less than the carrying value
of the reporting unit. We have one reporting unit that carries goodwill (Industrial IoT). If the fair value of the reporting unit, based
on qualitative factors, may be less than the carrying value of the reporting unit, we then perform the goodwill impairment test required
under ASC 350 by comparing the fair value of the reporting unit with the carrying value of the reporting unit and, if the fair value is
less than the carrying value, the amount that the carrying value exceeds fair value represents the amount of goodwill impairment. Accordingly,
we would recognize an impairment loss in the amount of such excess.

In connection with the XTI
Merger we recorded $12 million in goodwill which was allocated to our Industrial IOT reporting unit. Since the closing date of the Merger
on March 12, 2024, the price of our common stock has declined significantly and may continue to fluctuate in future periods. A sustained
decrease in the price of our common stock is one of the qualitative factors to be considered as part of an impairment test when evaluating
whether events or changes in circumstances may indicate that it is more likely than not that a potential goodwill impairment exists.
We will continue monitoring the analysis of the qualitative and quantitative factors used as a basis for the goodwill impairment test
during fiscal year 2025 and at the Company’s October 1st annual testing date. As of March 31, 2025, Management evaluated
potential triggers and completed a qualitative assessment and determined in the aggregate, it is more likely than not, that the fair
value of the IoT reporting unit is less than its carrying value. Accordingly, Management performed a quantitative assessment whose results
determined the fair value of the reporting unit is greater than the carrying value of the reporting unit. The Company notes that the
fair value exceeded the carrying value by 2.2% as of March 31, 2025