10-Q: Quarterly report [Sections 13 or 15(d)]
Published on May 19, 2025
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ______________ to _______________
Commission File Number:
(Exact name of registrant as specified in its charter)
| | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which each is registered |
||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the issuer is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at May 15, 2025 | |
| Common Stock, par value $0.001 |
XTI AEROSPACE, INC.
Form 10-Q
For the Quarterly Period Ended March 31, 2025
TABLE OF CONTENTS
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION
CONTAINED IN THIS REPORT
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | our history of losses; |
| ● | our ability to achieve profitability; |
| ● | the risk that we have a limited operating history, have not yet manufactured any non-prototype aircraft or delivered any aircraft to a customer, and we and our current and future collaborators may be unable to successfully develop and market our aircraft or solutions, or may experience significant delays in doing so; |
| ● | the ability to meet the development and commercialization schedule with respect to the TriFan 600; |
| ● | our ability to secure required certifications for the TriFan 600 and/or any other aircraft we develop; |
| ● | our ability to navigate the regulatory environment and complexities with compliance related to such environment; |
| ● | the risk that our conditional pre-orders (which include conditional aircraft purchase agreements, non-binding reservations, and options) are canceled, modified, delayed or not placed and that we must return the refundable deposits; |
| ● | our ability to obtain adequate financing in the future as needed; |
| ● | emerging competition and rapidly advancing technologies in our industries that may outpace our technology; |
| ● | the risk that other aircraft manufacturers develop competitive VTOL aircraft or other competitive aircraft that adversely affect our market position; |
| ● | customer demand for the products and services we develop; |
| ● | our ability to develop other new products and technologies; |
| ● | our ability to attract customers and/or fulfill customer orders; |
| ● | our ability to enhance and maintain the reputation of our brand and expand our customer base; |
| ● | our ability to scale in a cost-effective manner and maintain and expand our manufacturing and supply chain relationships; |
ii
| ● | our ability to attract, integrate, manage, and retain qualified personnel or key employees; |
| ● | our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market; |
| ● | the risks relating to long development and sales cycles, our ability to satisfy the conditions and deliver on the orders and reservations, our ability to maintain quality control of our aircraft, and our dependence on third parties for supplying components and potentially manufacturing the aircraft; |
| ● | the risk that our ability to sell our aircraft may be limited by circumstances beyond our control, such as a shortage of pilots and mechanics who meet the training standards, high maintenance frequencies and costs for the sold aircraft, and any accidents or incidents involving VTOL aircraft that may harm customer confidence; |
| ● | general economic conditions and events and the impact they may have on us and our potential customers, including, but not limited to escalating tariff and non-tariff trade measures imposed by the U.S. and other countries, increases in inflation rates and rates of interest, supply chain challenges, increased costs for materials and labor, cybersecurity attacks, the ongoing conflicts between Russia and Ukraine and Hamas and Israel, and public health threats such as the COVID-19 pandemic; |
| ● | lawsuits and other claims by third parties or investigations by various regulatory agencies that we may be subjected to and are required to report, including but not limited to, the U.S. Securities and Exchange Commission (the “SEC”); |
| ● | the outcome of any known and unknown litigation and regulatory proceedings; |
| ● | the risk that our future patent applications may not be approved or may take longer than expected, and that we may incur substantial costs in enforcing and protecting our intellectual property; |
| ● | our ability to respond to a failure of our systems and technology to operate our business; |
| ● | impact of any changes in existing or future tax regimes; |
| ● | our success at managing the risks involved in the foregoing items; and |
| ● | other factors discussed in this Form 10-Q. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.
You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
iii
EXPLANATORY NOTE
On March 12, 2024 (the “Closing Date”), XTI Aerospace, Inc. (formerly known as Inpixon (“Legacy Inpixon”)), Superfly Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of XTI Aerospace (“Merger Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”), completed their previously announced merger transaction pursuant to that certain Agreement and Plan of Merger, dated as of July 24, 2023 and amended on December 30, 2023 and March 12, 2024 (the “XTI Merger Agreement”), pursuant to which Merger Sub merged with and into Legacy XTI with Legacy XTI surviving the merger as a wholly-owned subsidiary of XTI Aerospace (the “XTI Merger”). In connection with the closing of the XTI Merger, our corporate name changed to “XTI Aerospace, Inc.”
In this report, unless otherwise noted, or the context otherwise requires, the terms “XTI Aerospace,” the “Company,” “we,” “us,” and “our” refer to XTI Aerospace, Inc., Inpixon GmbH, Inpixon Holding UK Limited, IntraNav GmbH and, prior to the closing of the XTI Merger, Merger Sub, and after the XTI Merger, Legacy XTI.
The Company determined the XTI Merger should be accounted for as a reverse acquisition with Legacy XTI being considered the accounting acquirer. Therefore, the condensed consolidated financial statements included in this report represent a continuation of the financial statements of Legacy XTI and the results of operations of the accounting acquired entity, Legacy Inpixon, are included in the condensed consolidated financial statements as of the Closing Date and through the March 31, 2025 reporting date.
Note Regarding Reverse Stock Splits
The Company effected a reverse stock split of its outstanding common stock at a ratio of 1-for-100, effective as of March 12, 2024, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2) and satisfying the bid price requirements applicable for initial listing applications in connection with the closing of the XTI Merger. The Company also effected a reverse stock split of its outstanding common stock at a ratio of 1-for-250, effective as of January 10, 2025, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2). The Company has reflected the reverse stock splits on a retroactive basis herein, unless otherwise indicated.
iv
PART I — FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value data)
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | |
|||||
| Accounts receivable, net of allowance for credit losses of $ |
||||||||
| Other receivables | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
1
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except number of shares and par value data)
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||
| (Unaudited) | ||||||||
| Liabilities, Mezzanine Equity, and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | |
|||||
| Related party payables | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Accrued interest | ||||||||
| Customer deposits | ||||||||
| Warrant liability | ||||||||
| Operating lease obligation, current | ||||||||
| Deferred revenue | ||||||||
| Short-term debt | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Long-term debt | ||||||||
| Operating lease obligation, noncurrent | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 18) | ||||||||
| Mezzanine Equity | ||||||||
| Representative and placement agent warrants, net of issuance costs
of $ |
||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock - $ |
||||||||
| Series 4 Convertible Preferred Stock - |
||||||||
| Series 5 Convertible Preferred Stock - |
||||||||
| Series 9 Preferred Stock - |
||||||||
| Common Stock - $ |
||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Mezzanine Equity, and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
2
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Revenues | $ | $ | ||||||
| Cost of Revenues | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Merger-related transaction costs | ||||||||
| Impairment of intangible assets | ||||||||
| Amortization of intangible assets | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( |
) | ( |
) | ||||
| Other (Expense) Income | ||||||||
| Interest expense, net | ( |
) | ( |
) | ||||
| Amortization of deferred loan costs | ( |
) | ||||||
| Loss on extinguishment of debt | ( |
) | ( |
) | ||||
| Warrant issuance expense | ( |
) | ||||||
| Change in fair value of warrant liability | ||||||||
| Change in fair value of convertible notes payable | ||||||||
| Other | ( |
) | ||||||
| Total Other (Expense) Income | ( |
) | ||||||
| Net Loss, before tax | ( |
) | ( |
) | ||||
| Income tax provision | ( |
) | ||||||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| Preferred stock return | ( |
) | ( |
) | ||||
| Net Loss Attributable to Common Stockholders, Basic and Diluted | $ | ( |
) | $ | ( |
) | ||
| Net Loss Per Share, Basic and Diluted | $ | ( |
) | $ | ( |
) | ||
| Weighted Average Shares Outstanding, Basic and Diluted | ||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
3
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| Unrealized foreign exchange loss from cumulative translation adjustments | ( |
) | ( |
) | ||||
| Comprehensive Loss | $ | ( |
) | $ | ( |
) | ||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
4
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three months ended March 31, 2025
(Unaudited)
(In thousands, except share data)
| Series 9 | Accumulated | |||||||||||||||||||||||||||||||
| Preferred Stock at Redemption Value |
Common Stock |
Additional Paid-In |
Other Comprehensive |
Accumulated | Total Stockholders’ |
|||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance - January 1, 2025 | $ | $ | |
$ | $ | ( |
) | $ | ( |
) | $ | |
||||||||||||||||||||
| Common shares issued for net cash proceeds of ATM offering | ||||||||||||||||||||||||||||||||
| Common shares issued for net cash proceeds of public offerings | ||||||||||||||||||||||||||||||||
| Common shares issued for conversion of debt | ||||||||||||||||||||||||||||||||
| Common shares issued for exercise of liability classified warrants | ||||||||||||||||||||||||||||||||
| Redemption of Series 9 preferred stock | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | ||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance – March 31, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
5
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three months ended March 31, 2024
(Unaudited)
(In thousands, except share data)
| Series 9 | Accumulated | Total | ||||||||||||||||||||||||||||||
| Preferred Stock at Redemption Value |
Common Stock |
Additional Paid-In |
Other Comprehensive |
Accumulated | Stockholders’ Equity |
|||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Common and preferred shares issued via merger | ||||||||||||||||||||||||||||||||
| Common shares issued for conversion of debt | ||||||||||||||||||||||||||||||||
| Inducement loss on debt conversions | — | — | ||||||||||||||||||||||||||||||
| Common shares issued to Xeriant, Inc. | ||||||||||||||||||||||||||||||||
| Common shares issued for cashless exercise of warrants and options | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Capital contribution - forgiveness of related party payable | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Series 9 preferred stock dividend accrued | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
6
XTI AEROSPACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Cash Flows Used in Operating Activities | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of right-of-use asset | ||||||||
| Non-cash interest expense, net of interest income | ||||||||
| Stock-based compensation | ||||||||
| Impairment of intangible assets | ||||||||
| Change in fair value of convertible notes payable | ( |
) | ||||||
| Loss on extinguishment of debt | ||||||||
| Warrant issuance expense | ||||||||
| Change in fair value of warrant liability | ( |
) | ( |
) | ||||
| Other | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable and other receivables | ( |
) | ||||||
| Inventories | ( |
) | ||||||
| Prepaid expenses and other current assets | ( |
) | ( |
) | ||||
| Other assets | ( |
) | ||||||
| Accounts payable | ( |
) | ||||||
| Related party payables | ( |
) | ( |
) | ||||
| Accrued expenses and other current liabilities | ( |
) | ( |
) | ||||
| Accrued interest | ||||||||
| Deferred revenue | ( |
) | ||||||
| Operating lease obligation | ( |
) | ( |
) | ||||
| Net Cash Used in Operating Activities | ( |
) | ( |
) | ||||
| Cash Flows (Used in) Provided by Investing Activities | ||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||
| Cash received in purchase of Inpixon | ||||||||
| Purchase of intangible asset | ( |
) | ||||||
| Net Cash (Used in) Provided by Investing Activities | ( |
) | ||||||
| Cash Provided by Financing Activities | ||||||||
| Net proceeds from sale of common stock and pre-funded warrants via public offerings | ||||||||
| Net proceeds from ATM stock offering | ||||||||
| Net proceeds from the exercise of liability classified warrants | — | |||||||
| Net proceeds from promissory notes | ||||||||
| Net proceeds from loan from Inpixon (prior to merger) | ||||||||
| Redemption of Series 9 preferred stock | ( |
) | ||||||
| Repayments of promissory notes | ( |
) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Effect of Foreign Exchange Rate on Changes on Cash | ( |
) | ||||||
| Net Increase in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents - Beginning of period | ||||||||
| Cash and Cash Equivalents - End of period | $ | $ | ||||||
| Supplemental Disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Common shares issued for conversion of debt and accrued interest | $ | $ | ||||||
| Issuance of common shares for merger consideration, net of cash received | $ | $ | ||||||
| Right-of-use asset obtained in exchange for lease liability | $ | $ | ||||||
| Capital contribution - forgiveness of related party payable | $ | $ | ||||||
| Series 9 preferred stock dividend accrued | $ | $ | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements
7
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of Business
On March 12, 2024 (the “Closing Date”), XTI Aerospace, Inc., the “Company”, formerly known as Inpixon (“Legacy Inpixon”), Superfly Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Legacy Inpixon (“Merger Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”), completed their previously announced merger transaction (the “XTI Merger”).
The Company is primarily an aircraft development company. The Company also provides real-time location systems (“RTLS”) for the industrial sector, which was Legacy Inpixon’s focus prior to the closing of the XTI Merger. Headquartered in Englewood, Colorado, the Company is developing a vertical takeoff and landing (“VTOL”) airplane that is designed to take off and land like a helicopter and cruise like a fixed-wing business airplane. Since 2013, the Company has been engaged primarily in developing the aerodynamic performance and top-level engineering design of the TriFan 600, building and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors to enable the Company to advance the detailed design and certification of the TriFan 600, and to eventually engage in commercial production and sale of the TriFan 600 airplane.
The Company’s RTLS solutions leverage cutting-edge technologies such as IoT, AI, and big data analytics to provide real-time tracking and monitoring of assets, machines, and people within industrial environments. With the Company’s RTLS solutions, businesses can achieve improved operational efficiency, enhanced safety and reduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations.
Note 2 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three months ended March 31, 2025 are not necessarily indicative of the results for the full year ending December 31, 2025. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes for the years ended December 31, 2024 and 2023 included in the annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025.
8
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies
The Company’s complete accounting policies are described in Note 3 to the Company’s audited consolidated financial statements and notes for the year ended December 31, 2024.
Liquidity
As of March 31, 2025, the Company had cash of
approximately $
There can be no assurances that the Company will ever earn revenues sufficient to support its operations, or that it will ever be profitable. In order to continue its operations, the Company has supplemented the revenues it earned with proceeds from the sale of its equity securities and proceeds from loans.
The Company’s recurring losses and utilization
of cash in its operations are indicators of going concern issues. However, the Company’s current liquidity position was favorably
impacted by the cash raised under its now expired ATM and via two public offerings aggregating approximately $
Consolidations
The condensed consolidated financial statements have been prepared using the accounting records of Legacy XTI and as of March 12, 2024 (the effective date of the XTI Merger) and forward, the accounting records of XTI Aerospace, Inc. (formerly known as Inpixon), Inpixon GmbH (formerly known as Nanotron Technologies GmbH), Inpixon Holding UK Limited, and Intranav GmbH. All material inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of:
| ● | the valuation of stock-based compensation; |
| ● | the valuation of the Company’s common stock issued and assets acquired in transactions, including acquisitions; |
| ● | the valuation of convertible notes receivable; |
| ● | the valuation of convertible notes payable, at fair value; |
| ● | the valuation of warrant liabilities; and |
| ● | the valuation allowance for deferred tax assets. |
9
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Credit Risk and Concentrations
Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents.
The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit
risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers
and, based upon factors surrounding the credit risk of its customers, establishes an allowance for credit losses.
The customers who account for 10% or more of the Company’s revenue for the three months ended March 31, 2025 or March 31, 2024 or 10% or more of the Company’s outstanding receivable balance as of March 31, 2025 or March 31, 2024 are presented as follows:
| Percentage of revenues | Percentage of accounts payable | |||||||||||||||
| Three Months Ended March 31, | As of March 31, | |||||||||||||||
| Vendor | 2025 |
2024 |
2025 | 2024 | ||||||||||||
| A | % | % | % | |||||||||||||
| B | % | |||||||||||||||
| C | % | % | % | % | ||||||||||||
| D | % | % | ||||||||||||||
| E | % | |||||||||||||||
| ** |
|
The vendors who account for 10% or more of the Company’s purchases for the three months ended March 31, 2025 or March 31, 2024 or 10% or more of the Company’s outstanding payable balance as of March 31, 2025 or March 31, 2024 are presented as follows:
| Percentage of purchases | Percentage of accounts payable | |||||||||||||||
| Three Months Ended March 31, | As of March 31, | |||||||||||||||
| Vendor | 2025 |
2024 |
2025 | 2024 | ||||||||||||
| A | % | |||||||||||||||
| B | % | |||||||||||||||
| C | % | |||||||||||||||
| D | % | |||||||||||||||
| E | % | |||||||||||||||
| F | % | % | ||||||||||||||
|
|
10
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets and Goodwill
Finite-lived intangible assets primarily consist
of developed technology, patents, customer relationships, and trade names/trademarks. They are amortized ratably over a range of
The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.
The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches. For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, the Company uses internal analyses based primarily on market comparables. The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations.
The Company reviews its long-lived assets, inclusive of its right-of-use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition. If the carrying amount of an asset group exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value.
For the three months ended March 31, 2025, the
Company determined that its long-lived assets were impaired by approximately $
11
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods, in an amount that reflects the consideration that it expects to receive in exchange for those goods. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration, if any, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods it transfers to a customer.
Hardware and Software Revenue Recognition
For sales of hardware and software products, the Company’s performance obligation is satisfied at a point in time when they are shipped to the customer, at which control is deemed transferred to the customer, and has title of the product and holds the risks and rewards of ownership.
The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse. In such arrangements, the Company negotiates the sale price with the customer, pays the supplier directly for the product shipped, bears credit risk of collecting payment from its customers and is ultimately responsible for the acceptability of the product and ensuring that such product meets the standards and requirements of the customer. Accordingly, the Company concluded it is the principal in the transaction with the customer and records revenue on a gross basis. The Company receives fixed consideration for sales of hardware and software products. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice. The Company has elected the practical expedient to expense the costs of obtaining a contract when they are incurred because the amortization period of the asset that otherwise would have been recognized is less than a year.
Software As A Service Revenue Recognition
With respect to sales of the Company’s maintenance, consulting and other service agreements, customers pay fixed monthly fees in exchange for the Company’s service. The Company’s performance obligation is satisfied over time as the digital advertising and electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service.
Professional Services Revenue Recognition
The Company’s professional services include milestone, fixed fee and time and materials contracts. Professional services under milestone contracts are accounted for using the percentage of completion method. As soon as the outcome of a contract can be estimated reliably, contract revenue is recognized in the condensed consolidated statement of operations in proportion to the stage of completion of the contract. Contract costs are expensed as incurred. Contract costs include all amounts that relate directly to the specific contract, are attributable to contract activity, and are specifically chargeable to the customer under the terms of the contract.
Contract Balances
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied, principally within one year.
12
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Customer Deposits
The Company periodically enters into aircraft reservation agreements that include a deposit placed by a potential customer. The deposits serve to prioritize orders when the TriFan 600 airplane becomes available for delivery. Customers making deposits are not obligated to purchase any airplanes until they execute a definitive purchase agreement. Customers may request return of their deposit any time up until the execution of a purchase agreement. The Company records such advance deposits as a liability and defers the related revenue recognition until delivery of an airplane occurs, if any.
Stock-Based Compensation
The Company’s stock-based compensation relates to stock options granted to employees and non-employees. The Company recognizes the cost of share-based awards granted to employees and non-employees based on the estimated grant-date fair value of the awards. Forfeitures are accounted for as they occur, which may result in negative expense when forfeitures exceed the expense recorded within the period.
The Company recognizes expense on a straight-line basis over the requisite service period of the award, which is generally equal to the vesting period of the award.
The Company estimates the grant-date fair value of the stock option awards with service only vesting conditions using the Black-Scholes option-pricing model.
Net Loss Per Share
Net loss per share attributable to common stockholders is computed using the two-class method required for multiple classes of common stock and participating securities. The Company’s participating securities included the Company’s convertible preferred stock and preferred stock. Neither the holders of convertible preferred stock, preferred stock nor the holders of the Company’s common stock warrants have a contractual obligation to share in losses.
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss, as adjusted for any dividends on the preferred stock for the period, attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase or outstanding shares that are contingently returnable by the holder. Contingently issuable shares, including shares that are issuable for little or no cash consideration, are considered outstanding common shares and included in net loss per share as of the date that all necessary conditions have been satisfied. Such shares include outstanding penny warrants and shares that were issuable to Xeriant Inc. (“Xeriant”) related to the joint venture arrangement that expired on May 31, 2023.
13
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Foreign Currency
The functional currency for the Company’s subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in “Accumulated other comprehensive loss” in stockholders’ equity on the condensed consolidated balance sheets. The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in general and administrative expenses in the condensed consolidated statements of operations. Foreign exchange gains (losses) were immaterial for the three months ended March 31, 2025 and 2024, respectively.
Segments
The Company and its Chief Executive Officer, acting as the Chief Operating Decision Maker (“CODM”) determined its operating segments in accordance with ASC 280, “Segment Reporting” (“ASC 280”). The Company is organized and operates as two reporting segments based on similar economic characteristics, the nature of products and production processes, end-use markets, channels of distribution, and regulatory environments.
Recently Issued and Adopted Accounting Standards
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, which includes amendments to require the disclosure of certain specific costs and expenses that are included in a relevant expense caption on the face of the income statement. Specific costs and expenses that would be required to be disclosed include: purchases of inventory, employee compensation, depreciation and intangible asset amortization. Additionally, a qualitative description of other items is required, equal to the difference between the relevant expense caption and the separately disclosed specific costs. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, and are applied either prospectively or retrospectively at the option of the Company. The Company is evaluating the impact of the amendments on our condensed consolidated financial statements and disclosures.
14
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Standards Not Yet Adopted
In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. The Company does not expect to early adopt the new standard. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its financial statements and related disclosures.
Note 4 - Disaggregation of Revenue and Deferred Revenue
Disaggregation of Revenue
The Company recognizes revenue when control is
transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to
be entitled to in exchange for those products or services. The Company derives revenue from software as a service, design and implementation
services for its Indoor Intelligence systems, and professional services for work performed in conjunction with its systems recognition
policy.
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Recurring revenue | ||||||||
| Software | $ | $ | ||||||
| Total recurring revenue | $ | $ | ||||||
| Non-recurring revenue | ||||||||
| Hardware | $ | $ | ||||||
| Software | ||||||||
| Professional services | ||||||||
| Total non-recurring revenue | $ | $ | ||||||
| Total Revenue | $ | $ | ||||||
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Revenue recognized at a point in time | ||||||||
| Industrial IoT (1) | $ | $ | ||||||
| Total | $ | $ | ||||||
| Revenue recognized over time | ||||||||
| Industrial IoT (2) (3) | $ | $ | ||||||
| Total | $ | $ | ||||||
| Total Revenue | $ | $ | ||||||
| (1) |
| (2) |
| (3) |
15
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Deferred revenue
As of December 31, 2024 and March 31, 2025,
the Company had approximately $
Note 5 – Merger Transaction
The XTI Merger was accounted for as a reverse merger in accordance with GAAP. Under this method of accounting, Legacy Inpixon was treated as the “acquired” company for financial reporting purposes. This determination is primarily based on the fact that subsequent to the XTI Merger, Legacy XTI maintains control of the Board of Directors and management of the Company, and the preexisting shareholders of Legacy XTI have majority voting rights of the Company. For accounting purposes, the acquirer is the entity that has obtained control of another entity and, thus, consummated a business combination. Accordingly, Legacy XTI’s assets and liabilities are recorded at carrying value and the assets and liabilities associated with Legacy Inpixon are recorded at estimated fair value as of the acquisition date. The excess of the purchase price over the estimated fair value of the net assets acquired, if applicable, is recognized as goodwill.
The below summarizes the total consideration transferred in the business combination (in thousands):
| Fair value of common stock | $ | |||
| Fair value of warrants | ||||
| Fair value of preferred stock | ||||
| Fair value of debt assumed | ||||
| Total consideration | $ |
The Company determined the estimated fair value
of common stock included in consideration to be calculated based on Legacy Inpixon’s common stock outstanding of
The aggregate fair value of warrants was approximately
$
| Fair value of common stock | $ | |||
| Exercise price | $ | |||
| Expected term | ||||
| Volatility | % | |||
| Risk-free interest rate | % | |||
| Dividend yield | % |
16
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The fair value of preferred stock of approximately
$
The following table summarizes the purchase price allocations relating to the XTI Merger (in thousands):
| Assets acquired | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Notes and other receivables | ||||
| Inventory | ||||
| Prepaid assets and other current assets | ||||
| Property and equipment | ||||
| Other assets | ||||
| Warrant assets | ||||
| Tradename & trademarks | ||||
| Proprietary technology | ||||
| Customer relationships | ||||
| In process research and development | ||||
| Goodwill | ||||
| Liabilities assumed | ||||
| Accounts payable | ||||
| Accrued liabilities | ||||
| Operating lease obligation | ||||
| Deferred revenue | ||||
| Short-term debt | ||||
| Warrant liability | ||||
| Total liabilities assumed | ||||
| Estimated fair value of assets acquired | $ |
The assets were valued using a combination of
a multi-period excess earnings methodologies, a relief from royalty approach, a discounted cash flow approach and present value of cash
flows approach. The goodwill represents the excess fair value after the allocation of intangibles. As a nontaxable transaction, the historical
tax bases of the acquired assets, liabilities and tax attributes have carried over. Although no new tax goodwill has been created in the
transaction, the Company has approximately $
17
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Proforma Financial Information
The following unaudited proforma financial information presents the consolidated results of operations of the Company and Legacy Inpixon for the three months ended March 31, 2024, as if the acquisition had occurred as of the beginning of the first period presented (January 1, 2024) instead of on March 12, 2024. The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.
The proforma financial information for the Company and Legacy Inpixon is as follows (in thousands):
| For the Three Months Ended March 31, 2024 |
||||
| Revenues | $ | |||
| Net loss attributable to common stockholders | $ | ( |
) | |
| Net loss per basic and diluted share | $ | ( |
) | |
| Weighted average common shares outstanding: | ||||
| Basic and Diluted | ||||
Note 7 - Goodwill and Intangible Assets
Goodwill
In connection with the XTI Merger, the excess
of the purchase price over the estimated fair value of the net assets assumed of $
The following table summarizes the changes in the carrying amount of Goodwill for the three months ended March 31, 2025 (in thousands):
| Amount | ||||
| Beginning balance - January 1, 2025 | $ | |||
| Foreign currency translation adjustment | ||||
| Ending balance - March 31, 2025 | $ | |||
The Company tests goodwill for impairment at the reporting unit level annually, on October 1, or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. In accordance with ASC 350, the Company first performed a qualitative assessment to determine if there were any indicators of goodwill impairment that would require a quantitative analysis to be performed. The results of the qualitative analysis performed by the Company indicated there was a triggering event during the three months ended March 31, 2025 related to the IoT reporting unit, in the form of a sustained decrease of the Company’s stock price and a consistent history of operating losses.
In accordance with ASC 350, given a triggering event was identified, the Company performed a quantitative goodwill impairment analysis related to its Industrial IoT reporting unit, which concluded the carrying amount of the reporting unit did not exceed its estimated fair value, indicating that the goodwill of the reporting unit was not impaired. The Company utilized an income approach to assess the fair value of the reporting unit as of March 31, 2025. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
18
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets
Intangible assets at March 31, 2025 and December 31, 2024 consisted of the following (in thousands):
| March 31, 2025 | ||||||||||||||||||||
| Gross Amount |
Accumulated Amortization |
Impairment | Net Carrying Amount |
Remaining Weighted Average Useful Life |
||||||||||||||||
| Patents | $ | $ | ( |
) | $ | |||||||||||||||
| Trade Name/Trademarks | ( |
) | ( |
) | ||||||||||||||||
| Proprietary Technology | ( |
) | ( |
) | ||||||||||||||||
| Customer Relationships | ( |
) | ||||||||||||||||||
| In-Process R&D | ( |
) | ( |
) | - | - | ||||||||||||||
| Totals | $ | $ | ( |
) | ( |
) | $ | |||||||||||||
| December 31, 2024 | ||||||||||||||||
| Gross Amount |
Accumulated Amortization |
Impairment | Net Carrying Amount |
|||||||||||||
| Patents | $ | $ | ( |
) | $ | $ | ||||||||||
| Trade Name/Trademarks | ( |
) | ( |
) | ||||||||||||
| Proprietary Technology | ( |
) | ( |
) | ||||||||||||
| Customer Relationships | ( |
) | ( |
) | ||||||||||||
| In-Process R&D | ||||||||||||||||
| Totals | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||
Amortization expense for the three months ended March 31, 2025 and
2024 was approximately $
Future amortization expense on intangibles assets is anticipated to be as follows (in thousands):
| Year ending December 31, | Amount | |||
| 2025 (for 9 months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 and thereafter | ||||
| Total | $ | |||
The Company tests for impairment if a change in
circumstances or the occurrence of events indicates that potential impairment exists. In accordance with ASC 360, the Company first performed
a qualitative assessment to determine if there were any indicators of impairment that would require a quantitative analysis to be performed.
The results of the qualitative analysis performed by the Company determined there was a triggering event during the three months ended
March 31, 2025, in the form of a sustained decrease of the Company’s stock price and a consistent history of operating losses. The
Company notes that based on a quantitative assessment, the Company recorded an impairment to its Trade Names & Trademarks, Proprietary
Technology, and In-Process Research and Development of $
The Company assessed the fair value of the Trade Names & Trademarks, Proprietary Technology, and In-Process Research and Development by using an income approach in the form of a relief from royalty model, which considered a specified royalty rate, discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
19
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Other Balance Sheet Information
Prepaid expenses and other current assets
Prepaid expenses and other current assets as of March 31, 2025 and December 31, 2024 consisted of the following (in thousands):
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||
| AVX deposit - related party | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Deposits | ||||||||
| Prepaid consulting/professional fees | ||||||||
| Prepaid software | ||||||||
| Other | ||||||||
| Total prepaid expenses and other current assets | $ | $ | |
|||||
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities as of March 31, 2025 and December 31, 2024 consisted of the following (in thousands):
| As of March 31, 2025 |
As
of |
|||||||
| Accrued transaction bonuses – Strategic Transaction Bonus Plan | $ | $ | |
|||||
| Accrued transaction bonuses – related party | ||||||||
| Accrued bonus and commissions | ||||||||
| Accrued compensation and benefits | ||||||||
| Accrued other | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
20
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Debt
The Company’s outstanding debt consisted of the following at the periods indicated (in thousands):
| Short-Term Debt | Maturity | March 31, 2025 |
December 31, 2024 |
|||||||
| Promissory Note - May 1, 20241 | $ | $ | ||||||||
| Promissory Note - May 24, 20241 | ||||||||||
| Unamortized Discounts | ( |
) | ||||||||
| Total Short-Term Debt | $ | $ | ||||||||
| Long-Term Debt | ||||||||||
| SBA loan | $ | $ | ||||||||
| Total Long-Term Debt | $ | $ | ||||||||
| 1 | Promissory note was repaid in full during the three months ended March 31, 2025. |
Interest expense on outstanding
debt totaled approximately $
Streeterville Debt Exchanges and Repayment
During the three months ended March 31, 2025,
the Company issued an aggregate of
On March 31, 2025 and using the net proceeds from
the March Offering (see “March 2025 Public Offering” disclosure in Note 10), the Company repaid the remaining obligation
of approximately $
21
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Common Stock
Capital Raises
At-the-Market (ATM) Offering Program
The Company was able, from time to time, to sell
shares of the Company’s common stock under its “at-the-market” offering program (the “ATM”) through Maxim
Group LLC (“Maxim”), as the Company’s exclusive sales agent, up to a maximum offering amount of approximately $
During the three months ended March 31, 2025,
the Company sold
January 2025 Public Offering
On January 7, 2025, the Company entered into a
placement agency agreement with ThinkEquity LLC (the “Placement Agent”), pursuant to which the Company agreed to issue and
sell directly to various investors, in a best efforts public offering (the “January Offering”), an aggregate of
As part of its compensation for acting as placement
agent for the January Offering, the Company issued to the Placement Agent warrants (the “Placement Agent Warrants”) to purchase
March 2025 Public Offering
On March 28, 2025, the Company entered into an
underwriting agreement with ThinkEquity LLC (the “Representative”), as the representative of the underwriters named therein,
relating to a firm commitment underwritten public offering (the “March Offering”) of
The March Offering closed on March 31, 2025. The
net proceeds to the Company from the sale of the Shares and the Warrants after deducting the underwriting discounts and commissions and
other expenses payable by the Company were approximately $
Allocation of Net Proceeds
The aggregate net proceeds from the January Offering and the March
Offering were approximately $
22
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Preferred Stock
The Company is authorized to issue up to
Series 9 Preferred Stock Redemptions
On November 17, 2024, the Company entered into
a Consent, Waiver and Release Agreement (the “Consent Agreement”) with Streeterville and 3AM Investments, LLC (“3AM”),
an entity controlled by Nadir Ali, Legacy Inpixon’s former Chief Executive Officer and a former director of Legacy Inpixon, pursuant
to which Streeterville and 3AM authorized the Company to raise up to an additional $
As of December 31, 2024, Streeterville and 3AM
held
Pursuant to the Consent Agreement, the Company
delivered an aggregate of $
On March 27, 2025, the Company entered into a
Settlement Agreement with 3AM and other parties as further disclosed in Note 17. Pursuant to the Settlement Agreement, on the Effective
Date, the Company delivered the aggregate amount of $
As of March 31, 2025, there are
23
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stock Award Plans and Stock-Based Compensation
The Company has
2017 Plan
During 2017, Legacy XTI adopted the 2017 Plan,
which was amended in 2021 to increase the maximum shares eligible to be granted under the 2017 Plan. The Company may issue awards in the
form of restricted stock units and stock options to employees, directors, and consultants. Under the 2017 Plan, stock options are generally
granted with an exercise price equal to the estimated fair value of the Company’s common stock, as determined by the Company’s
Board of Directors on the date of grant. Options generally have contractual terms of
2018 Plan
In February 2018, Legacy Inpixon adopted the 2018 Plan, which is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan). As of March 31, 2025, there are unvested Restricted Stock or Restricted Stock Units outstanding under the 2018 Plan.
Incentive stock options granted under the 2018
Plan are granted at exercise prices at a minimum of
The aggregate number of shares that may be awarded
under the 2018 Plan as of March 31, 2025 was
24
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
See below for a summary of the stock options granted under the 2011, 2017, and 2018 plans:
| Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (Years) |
Aggregate Intrinsic Value (In millions) |
|||||||||||||
| Beginning balance as of January 1, 2025 | $ | $ | ||||||||||||||
| Granted | — | |||||||||||||||
| Exercised | — | |||||||||||||||
| Expired | — | |||||||||||||||
| Forfeited | ( |
) | ||||||||||||||
| Ending balance as of March 31, 2025 | $ | $ | ||||||||||||||
| Options vested and exercisable as of March 31, 2025 | $ | $ | ||||||||||||||
Stock-based Compensation Expense
The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award.
The Company measures compensation expense for its non-employee stock-based compensation under ASC 718, “Stock Based Compensation”. The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock or stock award on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.
The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.
The Company incurred the following stock-based compensation charges for the periods indicated below (in thousands):
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Employee and consultant stock options1 | $ | $ | ||||||
| Vesting of previously unvested warrants2 | ||||||||
| Merger-related professional fees2 | ||||||||
| Total | $ | $ | ||||||
| 1 | Amount included in general and administrative expenses on the condensed consolidated statements of operations. |
| 2 | Amount included in merger-related transaction costs on the condensed consolidated statements of operations. |
As of March 31, 2025, the total unrecognized compensation
expense related to unvested awards was approximately $
25
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock-based Compensation Related to the XTI Merger
Shares of Legacy XTI common stock were issued
to Scott Pomeroy, Chief Executive Officer of the Company and former CFO and board member of Legacy XTI, as transaction compensation immediately
prior to the XTI Merger closing time equal to
Shares of Legacy XTI common stock were issued
to Maxim as transaction compensation immediately prior to the XTI Merger closing time equal to
Shares of Legacy XTI common stock were issued
to Chardan Capital Markets LLC as transaction compensation immediately prior to the XTI Merger closing time equal to
Shares of Legacy XTI common stock were issued
to a non-executive officer as transaction compensation immediately prior to the XTI Merger closing time equal to
Note 13 - Warrants
The following table summarizes the activity of warrants outstanding:
| Number of Warrants | ||||
| Beginning balance as of January 1, 2025 | ||||
| Granted | ||||
| Exercised | ( |
) | ||
| Expired | ||||
| Exchanged | ||||
| Ending balance as of March 31, 2025 | ||||
| Exercisable as of March 31, 2025 | ||||
The weighted average exercise price of warrants
outstanding as of March 31, 2025 was $
26
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants Granted
January 2025 Public Offering
As part of its compensation for acting as placement agent for the January
Offering (refer to Note 10), the Company issued to the Placement Agent warrants (the “Placement Agent Warrants”) to purchase
The Placement Agent Warrants are classified as a
contingently redeemable warrant in accordance with ASC 718, since these warrants did qualify for equity classification, but could be
settled in cash or other assets in the event that another person or entity becomes the beneficial owner of
The measurement of fair value of the warrants was determined utilizing a Black-Scholes model considering all
relevant assumptions current at the date of issuance (i.e., share price of $
The grant date fair value of the warrants and shares of common stock on January 10, 2025 is summarized below and is reflected as temporary equity for the warrants and within additional paid-in capital for the common stock as of March 31, 2025.
| Instrument | Grant Date Fair Value | |||
| Common stock | $ | |||
| Placement Agent Warrants | $ | |||
March 2025 Public Offering
As part of the March Offering (refer to Note 10),
the Company issued pre-funded warrants (the “Pre-funded Warrants”) to purchase up to
Each Pre-funded Warrant was immediately exercisable upon issuance,
has an exercise price of $
Upon closing of the March Offering, the Company issued the Representative,
as partial compensation, warrants (the “Representative’s Warrants”) to purchase up to
Similar to the Placement Agent Warrants described above in this note section, the
Representative’s Warrants issued in connection with the March Offering were determined to be temporary equity under ASC 718 and
therefore reported in “Mezzanine Equity” on the Company’s condensed consolidated balance sheets, and the Common Warrants
and Pre-funded Warrants were determined to be liability classified. The Common Warrants and Pre-funded Warrants were recognized at fair
value at issuance, with the change in fair value of approximately $
The measurement of fair value of the Representative’s Warrants was
determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of
$
27
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The March Offering proceeds were allocated to each of the warrants
and the common stock based on their relative fair value.
| Instrument | Grant Date Fair Value |
|||
| Common stock | $ | |||
| Pre-funded Warrants | $ | |||
| Representative’s Warrants | $ | |||
| Common Warrants | $ | |||
Given that the gross proceeds received of $
Warrants Exercised
As of March 31, 2025,
Note 14 - Segments
The Company’s Chief Executive Officer, acting
as the Chief Operating Decision Maker (“CODM”), regularly reviews and manages certain areas of its businesses, resulting in
the Company identifying
The commercial aviation segment is currently in the pre-revenue development stage and its primary activity is the development of the TriFan 600 airplane. The Industrial IoT segment generates revenue primarily from the sale of real-time location system solutions for the industrial sector and its customers are primarily located in Germany and the U.S. As it relates to the Industrial IoT segment, the results disclosed in the table below only reflect activity following the XTI Merger closing through the March 31, 2025 reporting date.
Information on each of our reportable segments and reconciliation to consolidated loss from operations is presented in the table below. We have assigned certain previously reported expenses to each segment to conform to the way we internally manage and monitor our business. Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included expenses incurred for administrative and accounting staff, general liability and other insurance, accrued consulting fees and transaction bonuses relating to former Legacy Inpixon executives, professional fees and other similar corporate expenses.
28
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables reflect the results of operations from our business segments for the periods indicated below (in thousands):
| Three Months Ended March 31, 2025 | ||||||||||||||||
| Industrial | Commercial | Unallocated | ||||||||||||||
| IoT | Aviation | Costs | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment of intangible assets | ||||||||||||||||
| Other expenses(1) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| (1) |
| Three Months Ended March 31, 2024 | ||||||||||||||||
| Industrial | Commercial | Unallocated | ||||||||||||||
| IoT | Aviation | Costs | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Other expenses(1) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| (1) |
The reporting package provided to the Company’s CODM does not include the measure of assets by segment as that information isn’t reviewed by the CODM when assessing segment performance or allocating resources.
29
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Fair Value Measurements and Fair Value of Financial Instruments
The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and warrant liability. Cash and cash equivalents, accounts receivable and accounts payable are stated at their respective carrying amounts, which approximate fair value due to their short-term nature.
The Company’s assets and liabilities measured at fair value consisted of the following at the periods indicated:
| Fair Value at March 31, 2025 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Labilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | |||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
The fair value of the Level 3 warrant liability was determined by using a pricing model with certain significant unobservable market data inputs (refer to Note 13).
The table below provides a summary of changes in the estimated fair value of the Company’s Level 3 warrant liability:
| Warrant Liability | ||||
| Balance at January 1, 2025 | $ | |||
| Pre-funded and Common Warrants issued in connection with the March Offering (Note 13) | ||||
| Exercise of warrants | ( |
) | ||
| Change in fair value | ( |
) | ||
| Balance at March 31, 2025 | $ | |||
The change in fair value of the warrant liability is presented within “Change in fair value of warrant liability” on the condensed consolidated statements of operations.
30
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - Foreign Operations
Prior to the XTI Merger, the Company’s operations
were located primarily in the United States. After the XTI Merger, the Company’s operations are located primarily in the United States,
Germany, and the United Kingdom. Revenues by geographic area are attributed by country of domicile of our subsidiaries.
| United | United | |||||||||||||||||||
| States | Germany | Kingdom | Eliminations | Total | ||||||||||||||||
| For the Three Months Ended March 31, 2025: | ||||||||||||||||||||
| Revenues by geographic area | $ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Operating income (loss) by geographic area | $ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | |||||||||
| Net income (loss) by geographic area | $ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | |||||||||
| For the Three Months Ended March 31, 2024: | ||||||||||||||||||||
| Revenues by geographic area | $ | $ | $ | $ | $ | |||||||||||||||
| Operating income (loss) by geographic area | $ | ( |
) | $ | $ | $ | $ | ( |
) | |||||||||||
| Net income (loss) by geographic area | $ | ( |
) | $ | $ | $ | $ | ( |
) | |||||||||||
| As of March 31, 2025: | ||||||||||||||||||||
| Identifiable assets by geographic area | $ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Long lived assets by geographic area | $ | $ | $ | $ | $ | |||||||||||||||
| Goodwill by geographic area | $ | $ | $ | $ | $ | |||||||||||||||
| As of December 31, 2024: | ||||||||||||||||||||
| Identifiable assets by geographic area | $ | $ | $ | $ | ( |
) | $ | |||||||||||||
| Long lived assets by geographic area | $ | $ | $ | $ | $ | |||||||||||||||
| Goodwill by geographic area | $ | $ | $ | $ | $ | |||||||||||||||
31
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Related Party Transactions
Consulting Agreement with David Brody
David Brody, board member and founder of Legacy XTI, provided legal
and strategic consulting services to Legacy XTI under a consulting agreement. During the three months ended March 31, 2025 and 2024, Legacy
XTI paid Mr. Brody consulting compensation of $
Consulting Agreement with Scott Pomeroy
Scott Pomeroy and Legacy XTI entered into a consulting
agreement dated July 1, 2022, as amended effective January 1, 2023, that provided for his engagement as Legacy XTI’s Chief Financial
Officer. The agreement provided that Mr. Pomeroy receive a monthly compensation of $
Transactions with AVX Aircraft Company
On August 27, 2024, the Company entered into an
amended and restated letter agreement with AVX Aircraft Company (“AVX”), which amends and restates the original letter agreement,
dated as of March 25, 2024, by and between the Company and AVX, as subsequently amended, pursuant to which AVX provides consulting and
advisory services to the Company relating to the development and design of the TriFan 600 airplane in exchange for the payment of costs
incurred by AVX (with a target cost of approximately $
On April 18, 2025, XTI Aircraft Company entered into
a novation agreement with AVX and a recruiting firm, pursuant to which AVX assigned to XTI Aircraft Company all of AVX’s rights
and obligations under a talent acquisition engagement agreement with the recruiting firm and, as a result, the recruiting firm will assist
XTI Aircraft Company in hiring an executive for expected fees of approximately $
Agreements with Nadir Ali
On March 12, 2024, the Company entered into a consulting agreement with Nadir Ali (the “Ali Consulting Agreement”), the Company’s former Chief Executive Officer. Mr. Ali, through 3AM, held shares of the Company’s Series 9 Preferred Stock as disclosed in Note 11.
32
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the three months ended March 31, 2025 and
2024, the Company recognized compensation expense of approximately $
Pursuant to the Settlement Agreement (see “Settlement Agreement”
below in this note), as of March 31, 2025, the Company owed Mr. Ali accrued consulting fees of approximately $
On July 24, 2023, the compensation committee of
the Board (the “Compensation Committee”) of Legacy Inpixon adopted a Strategic Transaction Bonus Plan, which was amended on
March 11, 2024, and was intended to provide incentives to certain employees, including Mr. Ali, and other service providers to remain
with the Company through the consummation of a qualifying transaction. As of December 31, 2024, the Company had a transaction bonus obligation
of approximately $
Settlement Agreement
On March 27, 2025 (the “Effective Date”), the “Company entered into a settlement agreement (the “Settlement Agreement”) with 3AM, Grafiti Group LLC (“Grafiti Group”) and Nadir Ali (“Ali”). The terms of the Settlement Agreement include:
| ● | Termination of Ali Consulting Agreement. The Settlement Agreement provides that effective as of the Effective Date, the Ali Consulting Agreement was terminated, and in lieu of the $ |
On March 31, 2025, the Company paid
the Outstanding Amount of $
| ● | Former Management Payments. Pursuant to the Settlement Agreement,
the Company agreed to pay the Former Management Payments (as defined below) on the earlier of (a) the closing date of the Company’s
next financing transaction and (b) 30 days following the Effective Date of the Settlement Agreement, subject to certain penalties for
late payment. The “Former Management Payments” comprise (i) an aggregate amount of $ |
On March 31, 2025, the Company paid amounts due under the Former Management Payments in full.
33
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| ● | Preferred Stock Redemption. Pursuant to the Settlement Agreement, on the Effective Date, the Company delivered the aggregate amount of $ |
| ● | Mutual Release. As of the Effective Date, Ali, on behalf of himself and his former and current affiliated entities, including 3AM, Grafiti LLC and Grafiti Group (collectively, the “Ali Parties”) agreed to release the Company from all claims arising out of any obligations of the Company with respect to the Ali Consulting Agreement, that certain securities purchase agreement, dated as of March 12, 2024 (the “Series 9 Purchase Agreement”), by and between the Company and 3AM, and the portion of the Bonus Plan relating to Ali, from the beginning of time through and including the date on which the Company has delivered all payments due under the Settlement Agreement (the “Completion Date”). As of the Effective Date, the Company agreed to release the Ali Parties from all claims arising out of any obligations of the Ali Parties with respect to the payment of the purchase price as set forth in the Equity Purchase Agreement, the Ali Consulting Agreement, the Series 9 Purchase Agreement and the portion of the Bonus Plan relating to Ali, from the beginning of time through and including the Completion Date. |
| ● | Entire Agreement. The Settlement Agreement provides that it supersedes any prior consents or agreements regarding the allocation of financing proceeds for the payment of any obligations of the Company described in the Settlement Agreement. |
Grafiti Group Divestiture
On February 21, 2024, Legacy Inpixon completed
the disposition of the remaining portion of the Shoom, SAVES, and GYG business lines and assets (“Grafiti Group Divestiture”)
in accordance with the terms and conditions of the Equity Purchase Agreement. Pursuant to the terms of the Equity Purchase Agreement,
Grafiti Group acquired
34
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the Settlement Agreement dated March
27, 2025 (see “Settlement Agreement” above in this note), the Company agreed that, effective as of the Effective Date
of the Settlement Agreement, the Grafiti Purchase Amount shall be deemed to be satisfied in full and no further amounts shall be payable
to the Company by Grafiti Group or any of its affiliated parties pursuant to the Equity Purchase Agreement. As such, the Company reported
$
Note 18 - Commitments and Contingencies
Litigation
From time to time, the Company is subject to various claims, charges and litigation matters that arise in the ordinary course of business. The Company records a provision for a liability when it is both probable that the loss has been incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be reasonably estimated, it discloses the possible loss or range of loss. Any potential gains associated with legal matters are not recorded until the period in which all contingencies are resolved and the gain is realized or realizable. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. Except if otherwise indicated, it is not reasonably possible to determine the probability of loss or estimate damages for any of the matters discussed below, and therefore, the Company has not established reserves for any of these matters.
On December 6, 2023, Xeriant filed a complaint against
Legacy XTI, along with two unnamed companies and five unnamed persons, in the United States District Court for the Southern District of
New York (the “Xeriant Matter”). On January 31, 2024, Xeriant filed an amended complaint, which added the Company as a defendant
to the Xeriant Matter. On February 29, 2024, Xeriant filed a second amended complaint. The Xeriant Matter alleges that Legacy XTI has
prevented Xeriant from obtaining compensation owed under various agreements entered into between Xeriant and Legacy XTI, including but
not limited to a joint venture agreement, a cross-patent license agreement, an operating agreement, and a letter dated May 17, 2022 (the
“May 17 letter”) arising from Xeriant’s introducing Legacy XTI to a Nasdaq listed company as a potential acquirer of
Legacy XTI. In particular, Xeriant contends that Legacy XTI gained substantial advantages from the intellectual property, expertise, and
capital deployed by Xeriant in the design and development of Legacy XTI’s TriFan 600 airplane yet has excluded Xeriant from the
transaction involving the TriFan 600 technology in its merger with Legacy Inpixon, which has resulted in a breach of the May 17 letter.
Xeriant seeks damages in excess of $
On March 13, 2024, Legacy XTI moved for partial
dismissal of the second amended complaint. On January 14, 2025, the Court denied Legacy XTI’s motion to dismiss the complaint. On
January 28, 2025, Legacy XTI filed an answer to the second amended complaint. On January 28, 2025, Legacy XTI filed an amended answer
and counterclaims against Xeriant. The counterclaims assert that Xeriant (1) breached the joint venture agreement by failing to pay $
In connection with the Xeriant Matter, on June
12, 2024, we received a letter from counsel for Auctus Fund, LLC (“Auctus”), dated April 3, 2024, claiming that, pursuant
to the above-referenced May 17 letter by and between Xeriant and Legacy XTI, as a result of the XTI Merger and Legacy XTI’s entry
into a promissory note agreement with Legacy Inpixon in March 2023, XTI Aerospace and Legacy XTI may have assumed Xeriant’s obligations
under that certain Senior Secured Promissory Note in the principal amount of $
35
XTI AEROSPACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On or about August 1, 2024, Chardan Capital Markets
LLC (“Chardan”) commenced an arbitration (the “Arbitration”) before FINRA against the Company and its subsidiary,
XTI Aircraft Company (“Aircraft”). Aircraft and Chardan are parties to an engagement letter agreement (the “Agreement”).
In the Arbitration, Chardan originally alleged that the Company was bound by the Agreement even though it did not sign the Agreement,
which the Company denied. Chardan further alleged that Aircraft and the Company breached the Agreement by not making separate
payments to Chardan of $
On April 30, 2025, Chardan amended its Statement of Claim in the Arbitration.
The Amended Statement of Claim (“ASOC”) is asserted solely against Aircraft. Thus, the Company no longer is a respondent
in the Arbitration. Through the ASOC, Chardan now asserts claims against Aircraft for breach of contract and unjust enrichment.
It seeks to recover: (a) a $
The Company has indicated that Aircraft intends
to defend against the ASOC vigorously. As of March 31, 2025, the Company has accrued $
Commitment to Nadir Ali
As previously disclosed, the Company has a commitment
to pay Nadir Ali deferred consulting fees of $
36
Note 19 - Net Loss Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted loss per share attributable to common stockholders (in thousands, except share and per share data):
| For the Three Months Ended March 31, 2025 |
For the Three Months Ended March 31, 2024 |
|||||||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| Less: Preferred stock return | ( |
) | ( |
) | ||||
| Net Loss Attributable to Common Stockholders, Basic and Diluted | $ | ( |
) | $ | ( |
) | ||
| Net Loss Per Share, Basic and Diluted | $ | ( |
) | $ | ( |
) | ||
| Weighted Average Shares Outstanding, Basic and Diluted | ||||||||
The basic earnings per share calculation for the
three months ended March 31, 2025 and 2024 included
The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis):
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| Convertible preferred stock | ||||||||
| Convertible notes | ||||||||
| Total | ||||||||
Note 20 - Subsequent Events
Pre-funded Warrant Exercises
Subsequent to March 31, 2025,
Advisory Agreement
On May 13, 2025, the Company entered into an advisory
agreement with a third-party advisor, pursuant to which the Company agreed to pay $
In addition, the Company agreed to reimburse the
advisor for all reasonable travel and other out-of-pocket expenses incurred in connection with the advisory agreement up to a maximum
of $
The advisory agreement has a term of 180 days, subject to early termination or further extension, each upon the mutual consent of the parties.
37
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, particularly in Part II, Item 1A, “Risk Factors.”
Overview of Our Business
We are primarily an aircraft development company. We also provide real-time location systems (“RTLS”) for the industrial sector, which was Legacy Inpixon’s focus prior to the closing of the XTI Merger.
Headquartered in Englewood, Colorado, the Company is developing a vertical takeoff and landing (“VTOL”) airplane that is designed to take off and land like a helicopter and cruise like a fixed-wing business airplane. We believe our initial configuration, the TriFan 600 airplane, will be one of the first civilian fixed-wing VTOL airplane that offers the speed and comfort of a business airplane and the range and versatility of VTOL for a wide range of customer applications, including private aviation for business and high net worth individuals, emergency medical services, and regional charter air travel. Since 2013, we have been engaged primarily in developing the aerodynamic performance and top-level engineering design of the TriFan 600, building and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors to enable the Company to advance the detailed design and certification of the TriFan 600, and to eventually engage in commercial production and sale of the TriFan 600.
We continue to work to optimize our airplane design for both manufacturing and certification. The development of a VTOL airplane that meets our business requirements demands significant design and development efforts on all facets of the airplane. We believe that by bringing together a mix of talent with VTOL and traditional commercial aerospace backgrounds, we have built a team that enables us to move through the design, development, and certification of our VTOL airplane with the Federal Aviation Administration (“FAA”) in an efficient manner, thus allowing us to achieve our end goal of bringing to market our airplane as efficiently as possible.
To date, we have not generated any revenue from aircraft sales because we are still designing and developing our VTOL airplane. Additionally, we are seeking the necessary governmental approvals to bring the airplane into service. To continue funding these efforts, we will need to raise capital for the foreseeable future. The amount and timing of our future capital needs will depend on various factors, including the progress and results of our airplane’s design and development, our manufacturing operations, and our success in obtaining the required FAA certifications and other government approvals. For instance, any significant delays in securing FAA certifications or other government approvals may force us to raise more capital and could postpone our ability to generate revenue from aircraft sales.
Our RTLS solutions leverage cutting-edge technologies such as IoT, AI, and big data analytics to provide real-time tracking and monitoring of assets, machines, and people within industrial environments. With our RTLS solutions, businesses can achieve improved operational efficiency, enhanced safety and reduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations.
We report financial results for two segments: Commercial Aviation and Industrial IoT. For Industrial IoT, we generate revenue from sales of hardware, software licenses and professional services. During the quarter ended December 31, 2024, the Company began exploring strategic options to wind down and/or sell the hardware portions of the Company’s Industrial IoT business segment in order to shift its focus towards the sales of software products. For Commercial Aviation, the segment is pre-revenue as we are currently developing the TriFan 600 airplane.
Key Factors Affecting Operating Results
We believe that the growth of our business and our future success are dependent upon many factors, including our ability to retain and develop engineering internal and third-party resources, secure strategic partnerships with suppliers, expand the number of customer purchase orders, locate a facility for further aircraft development and testing, expand on that facility or locate to a new facility for commercial production, build-out production assembly lines in a timely manner, develop ancillary service offerings related to the TriFan 600 such as flight training and maintenance products, and secure the needed financing to achieve FAA certification.
While each of these areas presents significant opportunities for us, they also pose material challenges and risks that we must successfully address to achieve FAA certification of the TriFan 600 and further reach our current aircraft delivery forecasts.
38
Corporate Strategy Update
The Company’s primary focus is to power the vertical economy by delivering high-performance VTOL solutions that scale from aircraft to innovative technologies and infrastructure. With the TriFan 600 as our flagship commercial aviation product, we are laying the groundwork for an innovative family of versatile aircraft and solutions addressing passenger travel, logistics, autonomous operations, and defense missions that we believe will unlock significant growth and market leadership.
Expanding into autonomous, remotely operated drones is key to our strategic focus. By combining drone technology with VTOL innovation, we believe we are positioning the Company to accelerate the development of both unmanned aerial vehicles (UAV) and VTOL solutions, expand its market presence, and create new revenue-generating opportunities across multiple industries. We will also be opportunistic and may consider other strategic transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments and joint ventures. If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or debt in combinations appropriate for each acquisition.
Recent Events
January 2025 Registered Direct Offering, March 2025 Underwritten Offering and Debt Repayment
On January 7, 2025, the Company entered into a placement agency agreement with ThinkEquity LLC (“ThinkEquity”), as placement agent, pursuant to which the Company agreed to issue and sell directly to various investors, in a best efforts public offering (the “January Offering”), an aggregate of 1,454,546 shares of common stock at an offering price of $13.75 per share. The January Offering closed on January 10, 2025, resulting in net proceeds to the Company, after deducting commissions and expenses, of approximately $18.3 million.
On March 28, 2025, the Company entered into an underwriting agreement with ThinkEquity LLC, as the representative of the underwriters named therein, relating to a firm commitment underwritten public offering (the “March Offering”) of 765,200 shares of common stock (the “Shares”), pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 2,176,000 shares of common stock, and common warrants (the “Common Warrants”) to purchase up to 2,941,200 shares of common stock. The combined public offering price for each Share, together with one Common Warrant, was $1.36. The combined public offering price for each Pre-funded Warrant, together with one Common Warrant, was $1.359. Each Share, or a Pre-funded Warrant in lieu thereof, was sold together with one Common Warrant. The March Offering closed on March 31, 2025, resulting in net proceeds to the Company, after deducting commissions and expenses, of approximately $3.4 million. The Company used approximately $2.7 million of the net proceeds from the March Offering to repay in full all amounts outstanding, including a 115% prepayment penalty, in respect of two secured promissory notes issued by the Company to Streeterville Capital, LLC on May 1, 2024 and May 24, 2024.
Settlement Agreement
On March 27, 2025, the Company entered into the Settlement Agreement with 3AM, Grafiti Group and Nadir Ali (“Ali”). As a result of the Settlement Agreement, that certain Consulting Agreement, dated March 12, 2024 by and between the Company and Ali (the “Ali Consulting Agreement”) was terminated, and the Company has an outstanding advisory fee obligation to Ali of $1.5 million (the “Deferred Amount”) as of the date of this report, which is due in $500,000 installments on June 30, 2025, September 30, 2025, and December 31, 2025. Upon payment of the Deferred Amount in accordance with the terms of the Settlement Agreement, the Ali Advisory Fees shall be deemed to be satisfied in full and no further amounts shall be payable by the Company to Ali or his affiliated parties pursuant to the Ali Consulting Agreement.
Share Repurchase Program
On March 18, 2025, the Company issued a press release announcing that its board of directors authorized a share repurchase program to acquire up to $5 million of the Company’s common stock. The Company may purchase common stock by way of open market transactions, through privately negotiated transactions, or by other means including through the use of trading plans intended to qualify under Rule 10b-18 under the Exchange Act, in accordance with applicable securities laws and other restrictions. The timing, total value of stock repurchases, and aggregate number of shares repurchased will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has an initial term of 12 months, which may be extended to 18 months. The share repurchase program may be suspended or discontinued at any time and does not obligate us to acquire any amount of common stock.
Expansion of Corporate Advisory Board
During the quarter ended March 31, 2025, the Company expanded its corporate advisory board, which is now comprised of nine advisory board members led by Michael Tapp, who are helping the Company evaluate strategic opportunities to capitalize on the anticipated demand for the TriFan 600.
TriFan 600 Engineering Update
During the quarter ended March 31, 2025, the Company continued to advance the development of the TriFan 600. Below are key development milestones that were achieved during the quarter:
| ● | Optimization of the fuel system design of the airplane which increased the wing fuel volume from approximately 300 gallons to 400 gallons, improving maximum range and mission length. |
39
| ● | Improving the air intake and exhaust design to enhance performance and efficiency of the airplane’s propulsion system. |
| ● | Completed the downwash / outwash study allowing us to understand the airflows generated by the airplane during vertical takeoff and landing in order to evaluate safety and performance. |
In addition, the FAA accepted the Company’s type certification application for the TriFan 600 on March 17, 2025.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
The significant accounting policies of the Company are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” section of the Company’s annual report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to the Company’s critical accounting policies and estimates except for the valuation of long-lived and intangible assets and goodwill as noted below.
Valuation of Long-lived and Intangible Assets and Goodwill.
We periodically review long-lived assets and certain identifiable intangible assets for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” Goodwill and intangible assets not subject to amortization are reviewed annually for impairment in accordance with ASC 350, “Intangibles – Goodwill and Other,” or more often if there are indications of possible impairment.
The analysis to determine whether or not an asset is impaired requires significant judgments that are dependent on internal forecasts, including estimated future cash flows, estimates of long-term growth rates for our business, the expected life over which cash flows will be realized and assumed royalty and discount rates. Changes in these estimates and assumptions could materially affect the determination of fair value and any impairment charge. While the fair value of these assets are less than their carrying value based on our current estimates and assumptions, materially different estimates and assumptions in the future in response to changing economic conditions, changes in our business or for other reasons could result in the recognition of impairment losses higher than the amount currently recorded.
For assets to be held and used, including acquired intangible assets subject to amortization, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability of an asset is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Significant management judgment is required in this process.
For intangible assets not subject to amortization such as goodwill, we test for impairment annually, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. In testing goodwill for impairment, we compare the fair value with the carrying value. The determination of fair value is based on a discounted cash flow analysis, using inputs and assumptions such as revenue growth rates, other projected expenses, and discount rates. If we 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. Therefore, no goodwill impairment was recognized for the three months ended March 31, 2025.
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 the design, development, certification, and manufacturing of the airplane.
Industrial IoT
Our RTLS products are primarily sold on a license and SaaS mode, which we call “location as a service” or “LaaS.” In our licensing model, we also typically charge an annual maintenance fee. The LaaS model is typically for a 3-5 year contract and includes a license to use, maintenance and hardware upgrades. The LaaS model generates a recurring revenue stream.
Operating Expenses
Research and Development
Research and development activities represent a significant part of our business. Our research and development efforts focus on the design and development of (i) our indoor intelligence products, and (ii) our TriFan 600 airplane, including certain of the systems that will be used in it. As part of our aircraft development activities, we continue to work closely with the FAA towards our goal of achieving certification of our TriFan 600 airplane on an efficient timeline.
Research and development expenses consist primarily of costs incurred in connection with the research and development of the TriFan 600 airplane. These expenses include:
| ● | employee-related expenses, including salaries and benefits for personnel engaged in research and development functions; |
| ● | expenses incurred under agreements with third parties such as consultants and contractors; and |
| ● | software and technology-related expenses to support computer-aided design of the aircraft, flight simulations, and other technology needs of our engineers. |
Research and development costs are expensed as incurred. We expect our research and development expenses to increase significantly as we increase staffing to support aircraft engineering and software development, build aircraft prototypes and continue to explore and develop technologies.
We cannot determine with certainty the timing, duration or the costs necessary to complete the design, development, certification, and manufacturing of our TriFan 600 airplane due to the inherently unpredictable nature of our research and development activities. Development timelines, the probability of success, and development costs may differ materially from expectations.
Sales and Marketing Expenses
Sales and marketing costs include activities such as aircraft reservation procurement, public relations and business opportunity advancement. These functions mainly generate expenses relating to travel, trade show fees and costs, salaries and benefits. Sales and marketing expenses are expensed as incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, including non-capitalizable transaction costs; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs, facility related expenses including maintenance and allocated expenses for rent and other operating costs.
We anticipate that general and administrative expenses will increase substantially in the future as we increase our headcount to support continued research and development and commercialization of the TriFan 600.
Other (Expense) Income
Interest expense, net consists primarily of (i) interest relating to convertible and promissory notes payable, (ii) amortization of debt discounts relating to warrants and stock options issued in conjunction with convertible notes, and (iii) interest income on notes receivable.
41
Loss on extinguishment of debt includes (i) prepayment penalties and other expenses incurred during the three months ended March 31, 2025 as the Company fully repaid the Streeterville promissory notes before the maturity date, and (ii) inducement losses on debt conversions incurred by Legacy XTI when it entered into voluntary note conversion letter agreements with several note holders during the first quarter of 2024.
Change in fair value of convertible notes payable represents the remeasurement of certain Legacy XTI convertible notes to fair value. These notes were converted to equity prior to the closing of XTI Merger.
Change in fair value of warrant liability represents the remeasurement of certain outstanding warrants to fair value.
Other consists of miscellaneous income and expense items.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024
The following table sets forth selected consolidated financial data and as a percentage of period-over-period change:
| Three Months Ended March 31, |
||||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| (in thousands, except percentages) | Amount | Amount | Change | Change* | ||||||||||||
| Revenues | $ | 484 | $ | 220 | $ | 264 | 120.0 | % | ||||||||
| Cost of revenues | $ | 149 | $ | 79 | $ | 70 | 88.6 | % | ||||||||
| Gross profit | $ | 335 | $ | 141 | $ | 194 | 137.6 | % | ||||||||
| Operating expenses | $ | 10,737 | $ | 9,018 | $ | 1,719 | 19.1 | % | ||||||||
| Loss from operations | $ | (10,402 | ) | $ | (8,877 | ) | $ | (1,525 | ) | 17.2 | % | |||||
| Other (expense) income | $ | (2,485 | ) | $ | 6,279 | $ | (8,764 | ) | (139.6 | )% | ||||||
| Provision for income taxes | $ | 15 | $ | (4 | ) | $ | 19 | (475.0 | )% | |||||||
| Net loss | $ | (12,872 | ) | $ | (2,602 | ) | $ | (10,270 | ) | 394.7 | % | |||||
| * | Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results. |
Revenues
Revenues for the three months ended March 31, 2025 were $0.5 million compared to $0.2 million for the comparable period in the prior year for an increase of approximately $0.3 million. The revenue amount for the three months ended March 31, 2025 and 2024 represents the results of the revenue-generating Industrial IoT segment.
Cost of Revenues
Cost of revenues for the three months ended March 31, 2025 were $0.1 million compared to $0.1 million for the comparable period in the prior year. The cost of revenues represents the results of the revenue-generating Industrial IoT segment.
Gross Profit
Gross profit for the three months ended March 31, 2025 was $0.3 million compared to $0.1 million for the comparable period in the prior year, an increase of approximately $0.2 million, which is consistent with the increase in revenue. The gross profit amount represents the results of the revenue-generating Industrial IoT segment. The gross margin percentage was 69.2% and 64.1% for the three months ended March 31, 2025 and 2024, respectively. The margin increase is due primarily to a shift in sales mix to higher margin software solutions during the first quarter of 2025.
42
Operating Expenses
Operating expenses for the three months ended March 31, 2025 were $10.7 million and $9.0 million for the comparable period ended March 31, 2024, an increase of $1.7 million. Excluding the nonrecurring merger-related transaction costs of $6.5 million incurred during the three months ended March 31, 2024, operating expenses increased by $8.2 million.
This increase of $8.2 million was due primarily to (i) an increase in research and development expenses of $1.3 million, mainly attributable to the development of the TriFan 600, as the Company secured additional financing during the first quarter of 2025, (ii) an increase in sales and marketing expenses of $0.7 million as the Company invested more in brand development and awareness, trade show participation, and business development initiatives, (iii) an increase in non-cash impairment of intangible assets of $0.5 million, (iv) an increase in nonrecurring consulting compensation expense of $2.3 million relating to a consulting agreement entered into with the prior Chief Executive Officer of Legacy Inpixon on March 12, 2024 that terminated on March 27, 2025 pursuant to the Settlement Agreement, (v) an increase in the Industrial IoT segment’s general and administrative expenses of $0.6 million as the results for the three months ended March 31, 2024 only reflect the activity of the segment since the closing of the XTI Merger on March 12, 2024, and (vi) an aggregate increase of approximately $2.8 million due to (a) increases in legal and accounting fees relating to capital raising activities during the first quarter of 2025, (b) increase in administrative headcount to support operations growth, and (c) increases in public company-related professional fees as the 2024 historical results reflect the operations of a private company, Legacy XTI, from January 1, 2024 through the March 12, 2024 closing date of the XTI Merger.
Other (Expense) Income
Other (expense) income for the three months ended March 31, 2025 was a loss of $2.5 million compared to a gain of $6.3 million for the comparable period in the prior year.
The loss of $2.5 million for the three months ended March 31, 2025 was primarily attributable to (i) $0.4 million loss on extinguishment of debt due to the full repayment of the Streeterville promissory notes before the maturity date, and (ii) $2.0 million of financing costs incurred relating to the issuance of warrants in connection with the March Offering.
The gain of $6.3 million for the three months ended March 31, 2024 was primarily attributable to the Company recognizing a gain of approximately $12.9 million relating to the remeasurement of convertible notes payable at fair value. This gain was partially offset by inducement losses on debt conversions of approximately $6.7 million, which is included in “loss on extinguishment of debt” on the condensed consolidated statements of operations.
Provision for Income Taxes
The provision for income tax for the three months ended March 31, 2025 and 2024 was immaterial.
Liquidity and Capital Resources as of March 31, 2025
Our current capital resources and operating results as of and through March 31, 2025, consist of:
| 1) | working capital of approximately $12,000; |
| 2) | cash and cash equivalents of approximately $8 million; and |
| 3) | net cash used by operating activities for the three months ended March 31, 2025 of $15.2 million. |
43
The breakdown of our working capital as of the periods indicated below is as follows (in thousands):
| Working Capital | March
31, |
December 31, 2024 |
$ Change | |||||||||
| Current Assets | ||||||||||||
| Cash and cash equivalents | $ | 8,008 | $ | 4,105 | $ | 3,903 | ||||||
| Accounts receivable, net | 573 | 706 | (133 | ) | ||||||||
| Other receivables | 21 | 538 | (517 | ) | ||||||||
| Inventories | 2,318 | 2,214 | 104 | |||||||||
| Prepaid expenses and other current assets | 1,607 | 1,018 | 589 | |||||||||
| Total Current Assets | 12,527 | 8,581 | 3,946 | |||||||||
| Current Liabilities | ||||||||||||
| Accounts payable and related party payables | 3,866 | 5,538 | (1,672 | ) | ||||||||
| Accrued expenses and other current liabilities | 1,616 | 6,703 | (5,087 | ) | ||||||||
| Accrued interest | 342 | 522 | (180 | ) | ||||||||
| Customer deposits | 1,350 | 1,350 | — | |||||||||
| Warrant liability | 4,442 | — | 4,442 | |||||||||
| Operating lease obligation, current | 91 | 119 | (28 | ) | ||||||||
| Deferred revenue | 808 | 532 | 276 | |||||||||
| Short-term debt | — | 2,657 | (2,657 | ) | ||||||||
| Total Current Liabilities | 12,515 | 17,421 | (4,906 | ) | ||||||||
| Net Working Capital (Deficit) | $ | 12 | $ | (8,840 | ) | $ | 8,852 | |||||
Balance Sheet Improvement
During the three months ended March 31, 2025, we raised approximately $23.3 million in net proceeds through (i) our now expired ATM with Maxim and (ii) public offerings of our securities placed and underwritten by ThinkEquity LLC. The proceeds from these capital raises allowed us to significantly reduce debt and other obligations, while progressing the development of the TriFan 600 airplane. The following summarizes the improvements to our balance sheet from December 31, 2024 to March 31, 2025:
| ● | Cash and cash equivalents increased by approximately $3.9 million. |
| ● | Net working capital increased by approximately $8.9 million. |
| ● | We repaid in full the outstanding secured promissory notes issued to Streeterville, which resulted in the release of Streeterville’s security interest in the assets of XTI Aircraft Company. As of March 31, 2025, we had less than $0.1 million of interest-bearing debt outstanding, which matures in 2050. |
| ● | We redeemed the remaining outstanding shares of Series 9 Preferred Stock, leaving 0 shares of Series 9 Preferred Stock issued and outstanding as of March 31, 2025. The Series 9 Preferred Stock had restricted our ability to raise capital, as we were prohibited from taking certain actions without prior written consent from the holders of the Series 9 Preferred Stock. |
| ● | We repaid the remaining Strategic Transaction Bonus Plan obligation to prior Legacy Inpixon management, which was the primary driver for the approximate $5.1 million decline in accrued expenses and other current liabilities from December 31, 2024 to March 31, 2025. | |
| ● | We repaid the accounts payable and most commitments that were inherited from Legacy Inpixon. A remaining deferred consulting fee commitment of $1.5 million is still owed to Nadir Ali, the Company’s former Chief Executive Officer, which is payable in three $500,000 installments during the remaining fiscal year 2025. |
We believe the Company’s ability to raise capital has been favorably impacted by (i) the reduction of obligations either assumed from Legacy Inpixon or created by the XTI Merger closing and (ii) the elimination of the Streeterville secured debt and equity instruments with fundraising restrictions.
44
Contractual Obligations and Commitments
Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business. Our contractual obligations consist of operating lease liabilities and merger-related transaction liabilities that are included in our condensed consolidated balance sheet and vendor commitments associated with agreements that are legally binding. As of March 31, 2025, the total obligation for capitalized operating leases was approximately $0.3 million, of which approximately $0.1 million is expected to be paid in the next twelve months.
Customer Deposits
As of March 31, 2025, we received conditional pre-orders under a combination of non-binding aircraft purchase agreements, reservation deposit agreements, options and letters of intent for aircraft, which generated approximately $1.4 million of cash from customer deposits. These funds from customer reservation deposits will not be recorded as revenue until the orders for aircraft are delivered, which may not be for many years or at all if we do not deliver the aircraft. The deposits prioritize orders when the aircraft becomes available for delivery. Customers making deposits are not obligated to purchase aircraft until they execute a definitive purchase agreement. Customers may request a return of their refundable deposit any time up until the execution of a purchase agreement. Customers’ request for a return of their refundable deposits could adversely affect our liquidity resources, and we may be financially unable to return such deposits.
Commitment to Nadir Ali
As disclosed in Note 18 of the condensed consolidated financial statements, the Company has a commitment to pay Nadir Ali deferred consulting fees of $1,500,000 by wire transfer of immediately available funds in three equal installments of $500,000 each on June 30, 2025, September 30, 2025, and December 31, 2025.
Risks and Uncertainties
As of March 31, 2025, the Company has working capital of approximately $12,000 and cash and cash equivalents of approximately $8 million. For the three months ended March 31, 2025, the Company had a net loss of approximately $12.9 million. During the three months ended March 31, 2025, the Company used approximately $15.2 million of cash for operating activities.
45
There can be no assurances that the Company will ever earn revenues sufficient to support its operations, or that it will ever be profitable. In order to continue its operations, the Company has historically supplemented the revenues it earned with proceeds from the sale of our equity, including through our now expired ATM with Maxim, and debt securities and proceeds from loans and bank credit lines. We believe that our current revenue, as supplemented by proceeds from our financings, including the approximately $21.7 million net proceeds we raised in various public offerings of our securities placed and underwritten by ThinkEquity during the first quarter of 2025, a portion of which was used to fully repay short-term obligations including the outstanding Streeterville promissory note balances, along with our ability to defer or eliminate certain operating expenses that are under our control, will provide us with liquidity to fund our planned operating needs for at least the next twelve months.
According to our current development schedule, we do not expect to obtain FAA type certification and other necessary regulatory approvals and commence deliveries of the TriFan 600 until 2030 at the earliest. Therefore, we intend to raise additional capital through debt or equity financings as we continue to advance the design and certification of the TriFan 600.
As a result of our failure to timely file a Current Report on Form 8-K, upon the filing of our Annual Report on Form 10-K for the year ended December 31, 2024 on April 15, 2025, we became ineligible to use Form S-3 until August 2025 at the earliest. Our inability to use Form S-3 may significantly impair our ability to raise the necessary capital to fund our operations and execute our strategy. If we seek to access the capital markets through a registered offering during the period of time that we are unable to use Form S-3, we may be required to publicly disclose the proposed offering and the material terms thereof before the offering commences, we may experience delays in the offering process due to SEC review of a Form S-1 registration statement and we may incur increased offering and transaction costs and other considerations.
Liquidity and Capital Resources
The Company’s net cash flows used in operating, investing and financing activities for the three months ended March 31, 2025 and 2024 and certain balances as of the end of those periods are as follows (in thousands):
| For the Three Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (15,242 | ) | $ | (2,551 | ) | ||
| Net cash (used in) provided by investing activities | (45 | ) | 2,958 | |||||
| Net cash provided by financing activities | 19,173 | 1,390 | ||||||
| Effect of foreign exchange rate changes on cash | 17 | (1 | ) | |||||
| Net increase in cash and cash equivalents | $ | 3,903 | $ | 1,796 | ||||
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||
| Cash and cash equivalents | $ | 8,008 | $ | 4,105 | ||||
| Working capital (deficit) | $ | 12 | $ | (8,840 | ) | |||
46
Operating Activities for the three months ended March 31, 2025
Net cash used in operating activities during the three months ended March 31, 2025 was approximately $15.2 million. The cash flows related to the three months ended March 31, 2025 consisted of the following (in thousands):
| Net loss | $ | (12,872 | ) | |
| Non-cash income and expenses | 3,244 | |||
| Net change in operating assets and liabilities | (5,614 | ) | ||
| Net cash used in operating activities | $ | (15,242 | ) |
The non-cash income and expense of approximately $3.0 million consisted primarily of the following (in thousands):
| $ | 32 | Depreciation and amortization | ||
| 91 | Amortization of intangible assets | |||
| 53 | Amortization of right-of-use asset | |||
| 145 | Non-cash interest expense, net of interest income | |||
| 455 | Stock-based compensation | |||
| 531 | Impairment of intangible assets | |||
| 421 | Loss on extinguishment of debt | |||
| 2,016 | Warrant issuance expense | |||
| (503 | ) | Change in fair value of warrant liability | ||
| 3 | Other | |||
| $ | 3,244 | Total non-cash expenses |
The net cash used in the change in operating assets and liabilities aggregated approximately $5.6 million and consisted primarily of the following (in thousands):
| $ | 157 | Decrease in accounts receivable and other receivables | ||
| (265 | ) | Increase in inventories, prepaid expenses and other current assets and other assets | ||
| (675 | ) | Decrease in accounts payable and related party payables | ||
| (4,892 | ) | Decrease in accrued expenses and other current liabilities | ||
| 67 | Increase in accrued interest | |||
| 46 | Increase in deferred revenue | |||
| (52 | ) | Decrease in operating lease obligation | ||
| $ | (5,614 | ) | Net cash used in the changes in operating assets and liabilities |
The decrease in accrued expenses and other current liabilities of approximately $4.9 million was mainly attributable to (i) cash payments to settle the remaining accrued transaction bonuses and consulting fees owed to prior Legacy Inpixon executives, and (ii) payment of accrued employee bonuses.
47
Operating Activities for the three months ended March 31, 2024
Net cash used in operating activities during the three months ended March 31, 2024 was approximately $2.6 million. The cash flows related to the three months ended March 31, 2024 consisted of the following (in thousands):
| Net loss | $ | (2,602 | ) | |
| Non-cash income and expenses | (719 | ) | ||
| Net change in operating assets and liabilities | 770 | |||
| Net cash used in operating activities | $ | (2,551 | ) |
The non-cash income and expense of approximately $0.7 million consisted primarily of the following (in thousands):
| $ | 13 | Depreciation and amortization | ||
| 43 | Amortization of intangible assets | |||
| 10 | Amortization of right-of-use asset | |||
| 94 | Non-cash interest expense, net of interest income | |||
| 5,792 | Stock-based compensation | |||
| (12,882 | ) | Change in fair value of convertible notes payable | ||
| 6,732 | Loss on extinguishment of debt | |||
| (398 | ) | Change in fair value of warrant liability | ||
| (123 | ) | Other | ||
| $ | (719 | ) | Total non-cash expenses |
The net cash provided by the change in operating assets and liabilities aggregated approximately $0.8 million and consisted primarily of the following (in thousands):
| $ | (143 | ) | Increase in accounts receivable and other receivables | |
| (475 | ) | Increase in inventories, prepaid expenses and other current assets and other assets | ||
| 1,662 | Increase in accounts payable and related party payables | |||
| (496 | ) | Decrease in accrued expenses and other current liabilities | ||
| 243 | Increase in accrued interest | |||
| (13 | ) | Decrease in deferred revenue | ||
| (8 | ) | Decrease in operating lease obligation | ||
| $ | 770 | Net cash provided by the changes in operating assets and liabilities |
Cash Flows from Investing Activities as of March 31, 2025 and 2024
Net cash flows used in investing activities during the three months ended March 31, 2025 was approximately $45,000. Net cash flows provided by investing activities during the three months ended March 31, 2024 was approximately $3.0 million. Cash flows related to investing activities during the three months ended March 31, 2024 consist primarily of the cash assumed from Legacy Inpixon in connection with the XTI Merger.
48
Cash Flows from Financing Activities as of March 31, 2025 and 2024
Net cash flows provided by financing activities during the three months ended March 31, 2025 was approximately $19.2 million. During the three months ended March 31, 2025, the Company received incoming cash flows of $1.7 million from the now expired ATM and $21.7 million from the sale of common stock and warrants via two public offerings. During the three months ended March 31, 2025, the Company paid $2.7 million to fully settle the two outstanding promissory note obligations with Streeterville and $1.4 million to redeem the remaining outstanding Series 9 Preferred Stock.
Net cash flows provided by financing activities during the three months ended March 31, 2024 was approximately $1.4 million. During the three months ended March 31, 2024, the Company received incoming cash flows of $0.4 million from a promissory note relating to the financing of insurance premiums, and $1.0 million in proceeds from an existing promissory note arrangement with Legacy Inpixon.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Recently Issued Accounting Standards
For a discussion of recently issued accounting pronouncements, please see Note 3 to our condensed consolidated financial statements, which are included in Part I, Item 1 of this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed consolidated financial statements in conformity with GAAP.
We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations of the Effectiveness of Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
49
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings as defined by Item 103 of Regulation S-K, to which we are a party or of which any of our property is the subject, other than ordinary routine litigation incidental to the Company’s business and as described in Note 18 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report under the heading “Litigation.”
There are no proceedings in which any of the directors, officers or affiliates of the Company, or any registered or beneficial holder of more than 5% of the Company’s voting securities, is an adverse party or has a material interest adverse to that of the Company.
Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risks. In addition to the risk factors set forth below and the other information set forth in this Form 10-Q, you should carefully consider the factors disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025, which report is incorporated by reference herein, all of which could materially affect our business, financial condition and future results.
Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results and cash flows.
We may be a party to claims that arise from time to time in the ordinary course of our business, which may include those related to, for example, our securities offerings, contracts, sub-contracts, protection of confidential information or trade secrets, adversary proceedings arising from customer bankruptcies, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business.
Additionally, we are and we may be made a party to future claims relating to the XTI Merger. On December 6, 2023, Xeriant, Inc. (“Xeriant”) filed a complaint against Legacy XTI, along with two unnamed companies and five unnamed persons, in the United States District Court for the Southern District of New York. On January 31, 2024, Xeriant filed an amended complaint, which added us as a defendant. On February 2, 2024, the Court ordered Xeriant to show cause as to why the amended complaint should not be dismissed without prejudice for lack of subject matter jurisdiction. On February 29, 2024, Xeriant filed a second amended complaint, which removed us and one of the unnamed companies as defendants. The second amended complaint alleges that Legacy XTI, through multiple breaches and fraudulent actions, has caused substantial harm to Xeriant and has prevented it from obtaining compensation owed to it under various agreements entered into between Xeriant and Legacy XTI, including but not limited to a joint venture agreement, a cross-patent license agreement, an operating agreement, and a letter dated May 17, 2022 (the “May 17 letter”) arising from Xeriant’s introducing Legacy XTI to a Nasdaq listed company as a potential acquirer of Legacy XTI. In particular, Xeriant contends that Legacy XTI gained substantial advantages from the intellectual property, expertise, and capital deployed by Xeriant in the design and development of Legacy XTI’s TriFan 600 airplane yet has excluded Xeriant from the transaction involving the TriFan 600 technology in its merger with us, which has resulted in a breach of the May 17 letter, in addition to the other aforementioned agreements. Xeriant, in the second amended complaint, asserts the following causes of action: (1) breach of contract; (2) intentional fraud; (3) fraudulent concealment; (4) quantum meruit; (5) unjust enrichment; (6) unfair competition/deceptive business practices; and (7) misappropriation of confidential information, and seeks damages in excess of $500 million, injunctive relief enjoining us from engaging in any further misconduct, the imposition of a royalty obligation, and such other relief as deemed appropriate by the court. On March 13, 2024, Legacy XTI moved for partial dismissal of the second amended complaint. On January 14, 2025, the Court denied Legacy XTI’s motion to dismiss the complaint. On January 28, 2025, Legacy XTI filed an answer to the second amended complaint. On January 28, 2025, Legacy XTI filed an amended answer and counterclaims against Xeriant. The counterclaims assert that Xeriant (1) breached the joint venture agreement by failing to pay $4,600,000 to fund development of the TriFan 600 technology, and (2) breached its fiduciary duty to XTI by engaging in bad faith, coercion, and self-dealing, including by appropriating material information for its own use and concealing from Legacy XTI the identity of a potential strategic partner. On March 18, 2025, Xeriant moved for dismissal of Legacy XTI’s counterclaims. The case is in its early stages of discovery, and we are unable to estimate the likelihood or magnitude of a potential adverse judgment. Legacy XTI nevertheless denies the allegations of wrongdoing contained in the second amended complaint and is vigorously defending against the lawsuit.
50
In connection with the litigation matter described in the immediately preceding paragraph, on June 12, 2024, we received a letter from counsel for Auctus Fund, LLC (“Auctus”), dated April 3, 2024, claiming that, pursuant to the above-referenced May 17 letter by and between Xeriant and Legacy XTI, as a result of the XTI Merger and Legacy XTI’s entry into a promissory note agreement with Legacy Inpixon in March 2023, XTI Aerospace and Legacy XTI may have assumed Xeriant’s obligations under that certain Senior Secured Promissory Note in the principal amount of $6,050,000 issued by Xeriant to Auctus, including the obligation to repay Auctus all principal and accrued and unpaid interest thereunder, which Auctus claims was $8,435,008.81 as of April 3, 2024. In July 2024, Legacy XTI responded to such letter and indicated that it believes that the May 17 letter is invalid and unenforceable on several bases. It further explained that even if it were valid and enforceable, Legacy XTI does not believe such letter resulted in, or otherwise triggered, the assumption of obligations of Xeriant under the Senior Secured Promissory Note or any other obligation on the part of Legacy XTI. There have been no further developments on this matter. We are unable to make a reasonable estimate of a potential loss, if any, on this matter. To the extent suits or actions are commenced with respect to this matter, we intend to vigorously defend against any and all claims.
On or about August 1, 2024, Chardan Capital Markets LLC (“Chardan”) commenced an arbitration (the “Arbitration”) before FINRA against the Company and its subsidiary, XTI Aircraft Company (“Aircraft”). Aircraft and Chardan are parties to an engagement letter agreement (the “Agreement”). In the Arbitration, Chardan originally alleged that the Company was bound by the Agreement even though it did not sign the Agreement, which the Company denied. Chardan further alleged that Aircraft and the Company breached the Agreement by not making separate payments to Chardan of $200,000, $94,511, $484,044.40 and $174,000. Chardan also sought to recover unspecified amounts relating to an alleged right of first refusal to perform banking services (the “ROFR”) that the Company supposedly did not honor, including with respect to an At-The-Market securities offering that was underwritten by The Maxim Group LLC (the “ATM”). The Company filed a petition in the U.S. District Court for the Southern District of New York (the “Court”) seeking to stay the Arbitration to the extent that it was asserted against the Company. On or about January 21, 2025, the Court entered a final judgment that: (a) enjoins Chardan from prosecuting the Arbitration against the Company; and (b) declares that the Company has no contractual or other duty to arbitrate with Chardan.
On April 30, 2025, Chardan amended its Statement of Claim in the Arbitration. The Amended Statement of Claim (“ASOC”) is asserted solely against Aircraft. Thus, the Company no longer is a respondent in the Arbitration. Through the ASOC, Chardan now asserts claims against Aircraft for breach of contract and unjust enrichment. It seeks to recover: (a) a $200,000 cash payment that Aircraft supposedly was required to, but did not, make; (b) approximately $134,000 in damages, for supposedly issuing 189,037 shares of the Company’s common stock to Chardan on March 19, 2024 instead of 208,113 shares; and (c) all payments supposedly due to Chardan under the ROFR, which Chardan states continue to accumulate. According to Chardan, amounts due under the ROFR include 30% of any banking fees paid with respect to at least the following acts of the Company: (i) the entry into an Exchange Agreement, pursuant to which Streeterville exchanged the remaining balance of principal and accrued interest under a December 2023 Note in the aggregate amount $9,801,521 for 9,801.521 shares of the Company’s Series 9 Preferred Stock; (ii) the entry into an Equity Distribution Agreement with Maxim that increased the value of stock that could be sold under the Company’s ATM from $48,000,000 to $83,800,000; (iii) the January 10, 2025 capital raise that used the services of ThinkEquity LLC; and (d) the February 13, 2025 entry into an Exchange Agreement with Streeterville, wherein an outstanding secured promissory note issued on May 1, 2024 (the “May 2024 Note”) in the principal amount of $250,000.00 held by Streeterville was partitioned into a new secured promissory note (the “February 2025 Note”) in the same form and amount as the May 2024 Note, with the Company and Streeterville subsequently agreeing to exchange the February 2025 Note for 59,832 shares of Company common stock with an effective price of $4.21 per share. Aircraft has not yet responded to the ASOC. The Company has indicated that Aircraft intends to defend against the ASOC vigorously.
Regardless of the merits of any particular claim, responding to such actions could divert time, resources and management’s attention away from our business operations, and we may incur significant expenses in defending these lawsuits or other similar lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our financial condition, operating results and cash flows. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as deductibles and caps on amounts of coverage. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to coverage for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our available insurance coverage for a particular claim.
We may also be required to initiate expensive litigation or other proceedings to protect our business interests. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve such claims or litigation. Litigation and other legal claims are subject to inherent uncertainties. Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate. Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our current financial status may increase our default and litigation risks and may make us more financially vulnerable in the face of threatened litigation.
51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a) Sales of Unregistered Securities
There were no sales of unregistered securities by the Company during the quarter ended March 31, 2025 that were not previously reported in current reports on Form 8-K filed with the SEC.
c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None of the Company’s
directors or officers
Item 6. Exhibits
See the Exhibit index following the signature page to this Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.
52
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| XTI AEROSPACE, INC | ||
| Date: May 19, 2025 | By: | /s/ Scott Pomeroy |
| Scott Pomeroy Chief Executive Officer (Principal Executive Officer) |
||
| By: | /s/ Brooke Turk | |
| Brooke Turk Chief Financial Officer (Principal Financial Officer) |
||
53
EXHIBIT INDEX
54
55
| † | Exhibits, schedules and similar attachments have been omitted pursuant to Item 601 of Regulation S-K and the registrant undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the SEC. |
| # | This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
56