Company: XTIA
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001213900-25-076767
Chunk: 189

Company: XTI Aerospace, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 8
Chunk 189
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 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 June 30, 2025, management evaluated potential triggers and determined there was a triggering event
during the six 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 for the three and six months ended June 30, 2025. One of the key factors in the calculation of the impairment amount
is the Company’s forecasted financial performance for the IoT reporting unit. If the projected revenues decreased by 10%, the goodwill
impairment amount would have increased by $2.9 million.

40

Components of Results of Operations

Revenue

Commercial Aviation

We are still working to design,
develop and certify the TriFan 600 airplane and thus have not generated revenue from this segment. We do not expect to begin generating
significant revenues until we complete