Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 313

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 2
Chunk 313
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 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 XTI
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 September 30, 2025, management evaluated
potential triggers and determined there was no triggering event during the three months ended September 30, 2025 relating to the Industrial
IoT reporting unit.

As of June 30, 2025, management
evaluated potential triggers and determined there was a triggering event during the three months ended June 30, 2025 relating to the Industrial
IoT reporting unit, in the form of a current period operating and cash flow loss, a consistent history of operating losses, and the revenue
results for the current period missing forecasted targets due to (i) the sales cycle to close transactions taking longer than anticipated,
and (ii) supply chain issues causing delays in our delivery of Nanotron product to customers. As such, the Company 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. Therefore, a goodwill impairment of $4.05 million was recognized during the second quarter of 2025. One of the key factors