What changed in XTI Aerospace, Inc.'s 10-K — 2024 vs 2025
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Paragraph-level year-over-year comparison of XTI Aerospace, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.
+752 added−677 removedSource: 10-K (2026-04-15) vs 10-K (2024-12-31)
Top changes in XTI Aerospace, Inc.'s 2025 10-K
752 paragraphs added · 677 removed · 149 edited across 7 sections
- Item 1A. Risk Factors+413 / −348 · 119 edited
- Item 7. Management's Discussion & Analysis+173 / −155 · 14 edited
- Item 1. Business+111 / −133 · 1 edited
- Item 3. Legal Proceedings+33 / −14 · 5 edited
- Item 1C. Cybersecurity+14 / −20 · 5 edited
Item 1. Business
Business — how the company describes what it does
1 edited+110 added−132 removed0 unchanged
Item 1. Business
Business — how the company describes what it does
1 edited+110 added−132 removed0 unchanged
2024 filing
2025 filing
Biggest changeThe information on, or that can be accessed through, our website is not part of this report, and you should not rely on any such information in making any investment decision relating to our common stock. 9
Biggest changeThe information contained on, or accessible through, the website is not incorporated by reference into this Annual Report, and you should not rely on any such information in making any investment decision relating to the Company’s securities.
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ITEM 1: BUSINESS Overview 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.
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ITEM 1: BUSINESS Overview XTI Aerospace is a provider of unmanned aerial systems (“UAS”) solutions operating through two business divisions: a commercial drone solutions business and an advanced systems and defense division. The Company expects to continue developing a third business division, a domestic manufacturing and technology division.
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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.
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The Company’s commercial drone solutions business, conducted primarily through its majority owned subsidiary, XTI Drones Holdings, LLC, which owns Drone Nerds, LLC and Anzu Robotics, LLC (collectively, “Drone Nerds”), constitutes substantially all of the Company’s revenues. The advanced systems and defense division (formerly XTI Aircraft) is in an earlier stage of development and has not yet generated any revenues.
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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.
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The Company was originally founded around the development of the TriFan 600, a planned vertical takeoff and landing (“VTOL”) aircraft.
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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.
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In 2025, the Company acquired Drone Nerds and, in light of that acquisition and its assessment of near-term opportunities in the unmanned systems market, redirected its former XTI Aircraft division beginning in 2026 toward the design and development of unmanned platforms for defense and commercial applications.
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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.
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The TriFan 600 program has been paused and the underlying intellectual property and engineering work product is being preserved and maintained. See “Business Divisions — TriFan 600 Strategic Context and Organizational Evolution” below for additional detail.
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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 FAA in an efficient manner, thus allowing us to achieve our end goal of bringing to market our airplane as efficiently as possible.
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The Company’s near-term focus is on growing its commercial drone platform, expanding the range of products and services offered to enterprise and government customers, and pursuing strategic acquisitions that extend its geographic reach and customer base. The Company also is seeking to generate revenue from its advanced systems and domestic manufacturing divisions.
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To date, we have not generated revenue from the sale of aircraft, as we continue to design, develop, and seek the governmental approvals necessary for our VTOL airplane to enter into service. We will need to raise capital for the foreseeable future to continue to fund our efforts to bring our VTOL airplane to market.
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The Company’s strategy is organized around three priorities: 1. Expand the commercial drone distribution and services platform by growing the customer base, increasing revenue per customer, and improving operating margins, supported by proprietary data on customer purchasing behavior across product categories, geographies, and markets; 2.
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The amount and timing of any future capital requirements will depend on many factors, including the pace and results of the design and development of our airplane and future manufacturing operations, as well as our progress in obtaining necessary FAA certifications and other government approvals.
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Pursue targeted acquisitions to expand geographic reach, add complementary capabilities, and deepen penetration across commercial and government markets; and 3. Develop capabilities in advanced unmanned systems technology, domestic manufacturing, and defense-oriented products and services to position the Company as a broader UAS solutions provider.
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For example, any significant delays in obtaining such FAA certifications and other government approvals will likely require us to raise additional capital and delay our generation of revenues 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.
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Corporate Strategy XTI’s objective is to build a scalable UAS solutions platform through organic growth in its commercial business, targeted acquisitions and the staged development of its advanced systems and domestic manufacturing capabilities. The following describes each element of this strategy. 1.
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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.
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Strengthen the Commercial Drone Solutions Business The Company is focused on expanding the scope of products and services offered through Drone Nerds to increase revenue per customer and improve operating margins. Current expansion areas include training and certification programs, repair and maintenance services, fleet management support, compliance assistance, and financing solutions.
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Corporate Strategy In addition to advancing the design and certification of the TriFan 600 for commercial production and sale, and in order to continue to respond to rapid changes and required technological advancements, increase our opportunities for revenue generation, and increase shareholder value, we are exploring strategic transactions and opportunities that we believe will enhance shareholder value.
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By offering these services alongside hardware distribution, the Company seeks to increase customer retention and establish longer-term customer relationships. Drone Nerds operates as an OEM-agnostic distributor, meaning it is not restricted to the products of a single manufacturer.
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We are particularly focused on delivering leading, business-focused solutions that seek to shape the future across powered-lift aircraft solutions. Expanding into autonomous, remotely operated drones is key to our strategic vision.
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The Company believes this model provides a competitive advantage by allowing it to recommend the most suitable platform for a given customer’s operational requirements, independent of manufacturer relationships. However, the Company’s ability to maintain this model depends on continued access to OEM products and dealer programs, which are subject to change. 1 2.
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By combining drone technology with VTOL innovation, we believe we are positioning XTI to accelerate the development of both unmanned aerial vehicles (UAV) and VTOL solutions, expand its market presence, and create new opportunities across multiple industries.
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Grow Through Strategic Acquisitions and Partnerships The UAS distribution and services market is highly fragmented. The Company intends to pursue acquisitions of complementary businesses that expand its customer base, geographic presence, or service capabilities. The Company uses data derived from its subsidiaries, primarily from Drone Nerds, to inform acquisition targeting decisions.
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We will also be opportunistic and may consider other strategic and/or attractive transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments and joint ventures.
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There can be no assurance that suitable acquisition targets will be identified, that acquisitions will be completed on acceptable terms, or that acquired businesses will be successfully integrated. The Company is also seeking to expand its customer base in government, defense, and public safety markets.
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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. In this regard, in January of this year, we entered into a non-binding memorandum of understanding to acquire a minority equity interest in an AI-powered, autonomous drone company.
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Procurement in these markets is subject to requirements around platform compliance, cybersecurity and domestic sourcing, which the Company believes may favor distributors with established compliance capabilities.
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We may enter into one or more additional non-binding letters of intent in connection with our due diligence and strategic transaction evaluation process.
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XTI believes it is well positioned to leverage its supply-side expertise and enterprise platform to serve these growing markets; however, government procurement decisions are subject to budgetary, regulatory and political factors outside the Company’s control. 3.
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In addition to these strategic initiatives, we also intend to invest in a variety of thought leadership marketing and branding initiatives to increase market visibility and enhance our brand strength and credibility within the powered lift aircraft market. 1 The Air Travel Market In today’s regional air travel market, customers have two choices – either a fixed-wing airplane, which requires a runway, or a helicopter, which is slower, comparatively expensive, and relatively range limited.
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Expand Domestic Manufacturing and Technology Capability XTI intends to develop U.S.-based manufacturing and advanced technology capabilities for unmanned systems through partnerships, joint ventures, and selective investments. These initiatives are designed to address demand from government and enterprise customers for domestically manufactured platforms, which has been increasing as regulatory and procurement requirements around foreign-sourced systems have tightened.
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What we intend to bring to market is a unique airplane combining the speed, range and comfort of a fixed-wing business airplane with the point-to-point VTOL capability of a helicopter. Our target customers for the TriFan 600 include corporate and individual business aircraft and helicopter operators, charter operators, major and regional airlines, and air medical operators.
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These development activities are at an early stage, and there can be no assurance that the Company will be able to execute manufacturing partnerships on acceptable terms or that demand for domestically manufactured platforms will develop as anticipated.
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In terms of current market size, the 2024 year-end General Aviation Aircraft Shipment Reports of the General Aviation Aircraft Manufacturers Association (“GAMA”) reports total general (civilian, non-commercial) aircraft and helicopter shipments billings at approximately $31.2 billion for 2024, an approximate 12% increase from 2023.
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Business Divisions Commercial Drone Solutions – XTI Drones (Drone Nerds) XTI’s commercial drone solutions business is currently conducted primarily through Drone Nerds, a UAS solutions provider offering hardware distribution, training and certification, repair and maintenance, fleet sustainment, compliance support, and integrated solutions to enterprise and government customers.
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We believe the anticipated differentiating performance capabilities of the TriFan 600 – the unique versatility delivered by combining the best of a helicopter and a business airplane in one platform which we expect will result in significant time and cost savings – will be attractive to customers and disruptive in existing markets.
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Drone Nerds operates through wholesale distribution, direct sales, and direct-to-consumer retail channels, including a retail showroom in South Florida and an e-commerce platform. The Company believes Drone Nerds is a significant enterprise-focused UAS distributor in the United States.
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As of the date of this filing, we have conditional pre-orders under a combination of aircraft purchase agreements, non-binding reservation deposit agreements and options for the delivery of more than 290 airplanes. See “- Customers - TriFan 600” for more information.
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The commercial drone solutions business currently generates substantially all of the Company’s revenues and provides the customer relationships, operational infrastructure, and market data that support the Company’s broader acquisition and development strategy.
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In contrast to the eVTOL (electric vertical takeoff and landing) aircraft, which are short-range air taxis for urban transport being developed by other companies (and not yet certified by the FAA), the TriFan 600 is expected to have significantly greater range of 700 miles in addition to the flexibility to take off and land vertically (VTOL), conventionally (CTOL), or on short runways (STOL).
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Autonomous Defense Systems (ADS), formerly XTI Aircraft — Strategic Context and Organizational Evolution The ADS division reflects a strategic shift away from the TriFan 600 program and toward nearer-term unmanned systems opportunities.
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With our initial configuration of two turboshaft engines, we expect that our customers will be able to use much of the existing infrastructure on the ground, including more than 5,000 existing helipads in the U.S. alone, as well as other landing areas where it is safe and legal to land and take off, including job sites, grassy areas, driveways, backyards, other paved and improved surfaces, hospital helipads and regional airports, which may not contain the requisite charging infrastructure for eVTOL aircraft.
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Management determined that continued development of the TriFan 600 program would require substantial additional time and capital, and the Company therefore redirected resources toward unmanned systems opportunities that it believes may offer nearer-term commercial applications. In response, management conducted a structured search for new divisional leadership with a mandate to reorient the business around nearer-term, capital-efficient opportunities.
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We expect that the TriFan’s speed, range, and comfort, as well as its flexibility in takeoff and landing sites will offer a significant competitive advantage over eVTOL aircraft because eVTOL aircraft depend on the availability of battery or hydrogen charging infrastructure which is not commercially available yet.
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That search concluded with the appointment of Steve Zohrabian, whose background in advanced manufacturing and defense product development is relevant to the operational and contractual realities of serving government and defense customers. The acquisition of Drone Nerds in November 2025 served as the second anchor point around which the division’s updated strategy was set.
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We expect that the TriFan 600 will provide increased connectivity between communities as well as generate time savings for travelers. As technology matures, we envision a transition to hybrid-electric propulsion for future TriFan configurations in our pursuit of taking aviation to a greener future.
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Together, Zohrabian’s appointment and the Drone Nerds acquisition defined the strategic perimeter of the division and marked the beginning of a transformation in staffing, focus, and organizational priorities — a transformation substantially completed in Q1 2026.
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We believe our phased, measured-risk approach is prudent given the lack of technology readiness of battery and hydrogen propulsion, limited and slow progress with respect to regulatory guidance regarding novel propulsion technologies, and expected long timelines to develop a widespread charging network.
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The ADS team is now building a core capability around the design, development, and production of unmanned platforms, with an emphasis on serving defense customers and supporting domestic procurement initiatives aligned with U.S. national security priorities.
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With time, we anticipate that owners and users of the TriFan will be able to access many of the landing pads, vertiports, and other VTOL aircraft infrastructure that we expect will accommodate eVTOL air taxis, which should allow the Company to participate to some extent in the future Advanced Air Mobility market.
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The Company believes the unmanned systems market — particularly in defense and government procurement — presents a more actionable near-term revenue opportunity than continued TriFan 600 development at this stage of the Company’s evolution. 2 TriFan 600 Program Status The TriFan 600 program has been paused. The underlying intellectual property and engineering work product are being preserved.
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As of the date of this filing, the base price of the TriFan 600 airplane is approximately $10 to $12 million. The announced price for our only known direct competitor for a civilian fixed-wing VTOL airplane is between $20 million and $30 million.
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Whether and when development may resume will depend on a number of factors, including capital availability, market conditions for advanced air mobility, further maturation of core technologies of the TriFan 600, such as full autonomy capabilities, and the Company’s overall strategic priorities at the relevant time.
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The TriFan 600’s $10 to $12 million base price falls within the price range ($6.5 million - $12 million) for many of the business airplanes with whom we expect the TriFan 600 to compete. Unlike the TriFan 600, these airplanes require runways for takeoff and landing, which adds to total trip times.
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Autonomous Defense Systems (ADS) The Company refers to this division as Autonomous Defense Systems, or ADS, a provisional designation. The division’s official name and branding have not yet been finalized and will be disclosed in a subsequent filing upon determination.
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The $10 to $12 million base price is above the initial purchase price range ($5.5 million to $8.2 million) for helicopters with whom the TriFan 600 expects to compete. However, the TriFan 600 will be capable of completing missions at approximately twice the speed of competing helicopters.
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The ADS division is focused on the design, development, and production of unmanned platforms for defense and commercial applications, drawing on the engineering expertise and intellectual property developed through the Company’s prior aerospace program. The division’s capabilities span autonomous systems design, advanced propulsion, and airframe engineering.
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Therefore, the mission time compared to helicopters is expected to be reduced by 40% - 50% and mission costs and emissions will also be reduced. As a result, we expect the TriFan 600’s five-year cost of ownership (initial base purchase price plus annual direct operating costs) to be lower than much of the helicopter competition.
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ADS pursues opportunities through internal development, strategic partnerships, and co-development arrangements, with an emphasis on defense procurement programs and domestic unmanned systems initiatives aligned with U.S. national security priorities. As described above, the division substantially completed its organizational transformation in Q1 2026 following the appointment of new leadership and the acquisition of Drone Nerds.
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Products and Services TriFan 600 Our aviation business is focused on the development of our initial configuration of the TriFan 600, which is a seven-occupant airplane intended to provide point-to-point air travel over distances of up to 985 miles, fly at twice the speed of a helicopter and cruise at altitudes up to 25,000 feet.
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Additional information regarding the division’s official name, organizational structure, and specific strategic initiatives will be provided as those matters are finalized. The ADS division has not yet generated any revenues. Its ability to generate revenues will depend on success in securing development contracts, partnerships, or procurement awards, all of which are subject to significant uncertainty.
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We believe that the target TriFan 600 airplane will provide unique advantages over existing helicopters, turboprop and light jet airplane.
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We are currently pursuing participation in five identified program opportunities with a combined potential R&D program value of approximately $147 million.
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Since the airplane will take off and land vertically, we anticipate that the TriFan 600 will generate significant time savings on a typical 500-mile trip by traveling point-to-point or utilizing more convenient existing ground and airspace infrastructure (such as helipads) to avoid or reduce the time traveling on the ground to and from an airport.
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If these development programs advance to production phases — which is subject to government procurement decisions, budgetary constraints, shifting defense priorities, program cancellations, competitive selection processes and other factors outside our control, and as to which there can be no assurance — and if we are able to develop the manufacturing capabilities necessary to meet resulting demand, we estimate the associated manufacturing opportunity could reach approximately $1.5 billion in the aggregate.
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The TriFan 600 also is expected to have the capability to take off and land conventionally, if a runway is available. This added capability is expected to increase range and payload and expand utility. 2 We plan to either assemble the TriFan 600 airplane in-house with supplier-provided components or engage a third-party manufacturer to assemble the airplane.
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These programs span potential customer agencies that include the U.S. Marine Corps, U.S. Army, U.S. Special Operations Command (SOCOM), U.S. Air Force, U.S. Navy, the Defense Advanced Research Projects Agency (DARPA), and the Air Force Research Laboratory (AFRL). See “Risk Factors — Risks Related to Our Business and Industries” for a discussion of the material risks associated with this division.
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By combining existing and future state-of-the-art technologies and components (including turbine engines, composites, software, advanced propulsion and fuel systems) into our patented proprietary design, we believe the TriFan 600 will be a commercially successful airplane for the business and other aviation markets.
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Advanced Technology and Manufacturing (ATM) The Company refers to this division as Advanced Technology and Manufacturing, or ATM, a provisional designation. The division’s official name, organizational structure, and branding have not yet been finalized and will be disclosed in a subsequent filing upon determination.
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Real-Time Location Systems (RTLS) & IIoT Solutions Our real-time location systems (RTLS) & IIoT solutions consist of the following software and hardware products.
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The Advanced Technology and Manufacturing (ATM) division is expected to be led by Alex Williams, Ph.D., and is expected to be focused on developing and scaling U.S.-based production capabilities for unmanned systems, components, and related technologies.
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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 sales of software products. ● Industrial RTLS SaaS Platform - Our full stack offering in the Industrial IoT space includes an enterprise class, multi-technology RTLS IoT platform for industrial automation.
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The division’s mandate will be to build a domestically sourced supply chain designed to support compliance with applicable federal procurement and sourcing requirements, including Section 848 of the National Defense Authorization Act for unmanned aerial systems — addressing the growing demand from federal agencies, defense contractors, and enterprise customers for drone platforms and components that meet Section 848 of the National Defense Authorization Act and satisfy applicable government procurement requirements for compliant UAS platforms and components. 3 Demand for compliant, domestically manufactured unmanned systems has accelerated as regulatory and procurement requirements around foreign-manufactured components have tightened.
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Our RTLS IoT platform is a comprehensive real-time IoT solution for the implementation of industrial RTLS (track & trace) applications for indoor and outdoor areas, such as vehicle localization, production tracking, yard management, gate allocation, forklift location (MHE), real-time route optimization, and the automatic identification (AutoID) and booking of goods and material flows.
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The Company believes this environment creates an opportunity to develop manufacturing relationships and capabilities that may support government and enterprise demand for compliant UAS platforms and components. The division plans to pursue growth through manufacturing partnerships, co-development arrangements, targeted acquisitions of domestic production capacity, and strategic investments in U.S.-based technology and component suppliers.
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In addition to real-time data applications for the digital twin, it also provides smart real-time location analyses from a single platform suite, enabling companies to identify significant process optimizations and make data-based decisions. Prebuilt modules offered within the platform include smart factory, smart warehouse, inventory manager, shipment manager, and yard manager.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
119 edited+294 added−229 removed81 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
119 edited+294 added−229 removed81 unchanged
2024 filing
2025 filing
Biggest changeFurthermore, integration involves a number of risks, including, but not limited to: ● difficulties or complications in combining the companies’ operations; ● differences in controls, procedures and policies, regulatory standards and business cultures among the combined companies; ● the diversion of management’s attention from our ongoing core business operations; ● increased exposure to certain governmental regulations and compliance requirements; ● the potential increase in operating costs; ● the potential loss of key personnel; ● the potential loss of key customers or suppliers who choose not to do business with the combined business; ● difficulties or delays in consolidating the acquired companies’ technology platforms, including implementing systems designed to maintain effective disclosure controls and procedures and internal control over financial reporting for the combined company and enable the Company to continue to comply with U.S.
Biggest changeIntegration involves a number of risks, including, but not limited to: ● the possibility that the purchase price we pay and/or unanticipated costs could significantly deplete our cash reserves or result in dilution to our existing stockholders; ● difficulties or complications in combining the companies’ operations, especially if we enter a market with no or limited prior experience; ● differences in controls, procedures and policies, regulatory standards and business cultures among the combined companies; ● the diversion of management’s attention from our ongoing core business operations; ● increased exposure to certain governmental regulations and compliance requirements; ● the potential increase in operating costs; ● the potential loss of key personnel; ● the potential loss of key customers or suppliers who choose not to do business with the combined business and the possibility that we may not be able to expand the reach and customer base for the acquired companies’ current and future products as expected; ● the possibility that certain liabilities, including contingent or unanticipated liabilities, related to the acquired companies’ prior operations may not be covered by insurance, indemnification provisions or other contractual protections; ● difficulties or delays in consolidating the acquired companies’ technology platforms, including implementing systems designed to maintain effective disclosure controls and procedures and internal control over financial reporting for the combined company and enable the Company to continue to comply with U.S.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following: ● our ability to execute our business plan and complete prospective strategic transactions; ● changes in our industry; ● competitive pricing pressures; ● our ability to obtain working capital financing; ● additions or departures of key personnel; ● limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock; ● sales of our common stock; ● operating results that fall below expectations; ● changes in our capital structure; ● costs associated with our acquisitions of companies, assets and technologies; ● regulatory developments; 31 ● economic and other external factors; ● period-to-period fluctuations in our financial results; ● our inability to develop or acquire new or needed technologies or news relating to such technologies; ● the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC; ● changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; ● the development and sustainability of an active trading market for our common stock; and ● any future sales of our common stock by our officers, directors and significant stockholders.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following: ● our ability to execute our business plan and complete prospective strategic transactions; ● changes in our industry; ● competitive pricing pressures; ● our ability to obtain working capital financing; ● additions or departures of key personnel; ● limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock; ● sales of our common stock; 41 ● operating results that fall below expectations; ● changes in our capital structure; ● costs associated with our acquisitions of companies, assets and technologies; ● regulatory developments; ● economic and other external factors; ● period-to-period fluctuations in our financial results; ● our inability to develop or acquire new or needed technologies or news relating to such technologies; ● the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC; ● changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; ● the development and sustainability of an active trading market for our common stock; and ● any future sales of our common stock by our officers, directors and significant stockholders.
Such suppliers may be subject to additional risks such as financial problems that limit their ability to conduct their operations. If any of these third parties experience difficulties, it may have a direct negative impact on us.
Such suppliers may be subject to additional risks such as financial problems that limit their ability to conduct their operations. If any of these third parties experience difficulties, it could have a direct negative impact on us.
Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are complex and often uncertain and are subject to change.
Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and intellectual property rights are complex, uncertain and subject to change.
ITEM 1A: RISK FACTORS We are subject to various risks and uncertainties that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves a high degree of risk.
ITEM 1A: RISK FACTORS We are subject to various risks and uncertainties that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock and other securities is speculative and involves a high degree of risk.
In that event, the trading price of our common stock could decline, and investors in our common stock may lose all or part of their investment in our shares. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
In that event, the trading price of our common stock could decline, and investors in our securities may lose all or part of their investment. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
We could incur significant costs to improve the climate resiliency of our aircraft or infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
We could incur significant costs to improve resiliency of our infrastructure and operations and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
Further, we could face competition from competitors of whom we are not aware that have developed or are developing technologies that will offer alternatives to the TriFan 600. Competitors could develop an aircraft that renders the TriFan 600 less competitive than we believe it will become.
We could face competition from competitors of whom we are not aware that have developed or are developing technologies that will offer alternatives to the TriFan 600. Competitors could develop an aircraft that renders the TriFan 600 less competitive than we believe it would become.
The issuance or sale of such securities could depress the market price of our common stock. 32 There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
The issuance or sale of such securities could depress the market price of our common stock. 42 There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
A significant portion of the purchase price related to our strategic acquisitions prior to the XTI Merger was allocated to goodwill and intangible assets that are subject to periodic impairment evaluations. An impairment loss could have a material adverse impact on our financial condition and results of operations.
A significant portion of the purchase price related to our strategic acquisitions was allocated to goodwill and intangible assets that are subject to periodic impairment evaluations, and an impairment loss could have a material adverse impact on our financial condition and results of operations.
We do not control these analysts. The price of our common stock could decline if one or more equity research analysts downgrade our common stock or if they issue other unfavorable commentary or cease publishing reports about us or our business. We may be or may become the target of securities litigation, which is costly and time-consuming to defend.
The price of our common stock could decline if one or more equity research analysts downgrade our common stock or if they issue other unfavorable commentary or cease publishing reports about us or our business. We may be or may become the target of securities litigation, which is costly and time-consuming to defend.
Despite our implementation of network security measures, the products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to cyber-attacks, data protection breaches, computer viruses, malicious acts, and similar disruptions from unauthorized tampering or human error.
Despite our implementation of network security measures, the products and services we sell to customers, and our servers, data centers and cloud-based solutions on which our data and the data of our customers, suppliers and business partners are stored, are vulnerable to cyber-attacks, data protection breaches, computer viruses, ransomware, malicious acts and similar disruptions resulting from unauthorized access, human error or other causes.
If we are not able to continue to increase sales of our RTLS products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues as well.
If we are not able to continue to increase sales of our UAS products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues.
Moreover, the laws of other countries may afford us little or no protection of our intellectual property. Our inability to protect our intellectual property rights could adversely affect our financial condition, operating results and growth prospects. We also rely on a variety of technology that we license from third parties.
The laws of other countries may afford us little or no protection of our intellectual property. Our inability to protect our intellectual property rights could adversely affect our financial condition, operating results and growth prospects. We also rely on a variety of technology that we license from third parties in connection with our UAS operations.
If our products are late in achieving or fail to achieve compliance with these certifications and standards, or competitors sooner achieve compliance with these certifications and standards, we may be disqualified from selling our products to such customers, or may otherwise be at a competitive disadvantage, either of which would harm our business, results of operations, and financial condition.
If products we distribute are late in achieving, or fail to achieve, compliance with applicable certifications and standards, or competitors sooner achieve such compliance, we may be disqualified from selling to such customers or may otherwise be at a competitive disadvantage, which could harm our business, results of operations and financial condition.
Litigation may be necessary to defend against these claims. We may be subject to unexpected claims of infringement of third party intellectual property rights, either for intellectual property rights of which we are not aware, or for which we believe are invalid or narrower in scope than the accusing party.
We may be subject to unexpected claims of infringement of third-party intellectual property rights, either for intellectual property rights of which we are not aware, or for which we believe are invalid or narrower in scope than the accusing party.
If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.
If we needed to find alternative suppliers for any of the key components of our aircraft, then this could increase our costs and adversely affect our ability to receive such components on a timely basis, or at all, which could cause significant delays in our overall projected timelines for the delivery of our aircraft and adversely affect our relationships with our customers.
If we needed to find alternative suppliers for any key components, then this could increase our costs and adversely affect our ability to receive such components on a timely basis, or at all, which could cause significant delays if we resume the program in the development, certification or commercialization of our aircraft and adversely affect our relationships with customers.
Additionally, in the event we are no longer a smaller reporting company, as defined under the Exchange Act, and we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act of 2002, then we may not be able to obtain the independent registered public accountants’ certifications required by that act, which may preclude us from keeping our filings with the SEC current, and interfere with the ability of investors to trade our securities and our shares to continue to be listed on the Nasdaq Capital Market. 35 If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud.
Additionally, in the event we are no longer a smaller reporting company, as defined under the Exchange Act, and we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act of 2002, then we may not be able to obtain the independent registered public accountants’ certifications required by that act, which may preclude us from keeping our filings with the SEC current, and interfere with the ability of investors to trade our securities and our shares to continue to be listed on the Nasdaq Capital Market.
Moreover, if a regulator were to initiate an enforcement action against us, any such action could further consume our resources, require us to change our business practices and have a material adverse effect on our business, financial condition, results of operations and cash flows. 22 Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results and cash flows.
Moreover, if a regulator were to initiate an enforcement action against us, any such action could further consume our resources, require us to change our business practices and have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our business could be adversely affected, and impairment of goodwill could be triggered, if any of the following were to occur: higher attrition rates than planned as a result of the competitive environment or our inability to provide products and services that are competitive in the marketplace, lower-than-planned adoption rates by customers, higher-than-expected expense levels to provide services to customers, sustained declines in our stock price and related market capitalization and changes in our business model that may impact one or more of these variables.
Our business could be adversely affected, and impairment charges could be triggered, if any of the following were to occur: higher attrition rates than planned as a result of the competitive environment or our inability to provide products and services that are competitive in the marketplace, lower-than-planned customer adoption rates, higher-than-expected expense levels, sustained declines in our stock price and related market capitalization, adverse changes in macroeconomic conditions, or changes in our business model.
Therefore, the board of directors of a Nevada corporation usually may unilaterally avoid the imposition of burdens imposed by the control share statute by amending the bylaws of the corporation in connection with a transaction.
Therefore, the board of directors of a Nevada corporation usually may unilaterally avoid the imposition of burdens imposed by the control share statute by amending the bylaws of the corporation in connection with a transaction. A Nevada corporation may impose stricter requirements if it so desires.
In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this report.
In evaluating an investment in our securities, you should carefully consider the risks described below, together with the other information included in this Annual Report.
Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate.
Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies, disclosures or actions relating to ESG matters are inadequate or inconsistent with their expectations.
While we believe that we may be able to establish alternate supply relationships and can obtain replacement components, we may be unable to do so in the short term or at all at prices that are acceptable to us or may need to recertify components.
While we believe that we may be able to establish alternate supply relationships and can obtain replacement components if the program is resumed, we may be unable to do so in the short term or at all at prices that are acceptable to us or may need to recertify components, which could increase costs or delay development timelines.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
Such challenges could increase our costs, reduce profitability, delay initiatives, harm our reputation and have a material adverse effect on our business, financial condition and results of operations. If we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated.
Digital threats such as cyber-attacks, data protection breaches, computer viruses or malware on our customers ’ networks, or in cloud-based services provided by or enabled by us, could result in liability for us, damage our reputation or otherwise harm our business.
Digital threats such as cyber-attacks, data protection breaches, computer viruses or malware affecting our systems, our customers’ systems or cloud-based services could result in liability for us, damage our reputation or otherwise harm our business.
A failure of our business relationships could have a material adverse effect on our business and results of operations. We are subject to risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure.
A failure of our business relationships could have a material adverse effect on our business and results of operations. We are subject to risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure, and market and regulatory trends relating to sustainability and emissions reduction may not evolve as expected.
For these reasons, even if we achieve profitability, we may be unable to use a material portion of our NOLs and other tax attributes which may have an adverse impact on our business, financial condition and results of operations. 17 We may enter into joint venture, teaming and other arrangements, and these activities involve risks and uncertainties.
As a result, even if we achieve profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could adversely affect our business, financial condition and results of operations. 27 We may enter into joint venture, teaming and other arrangements, and these activities involve risks and uncertainties, and a failure of any such relationship could have material adverse results on our business and results of operations.
Our RTLS business currently has a limited number of customers. The loss of a significant amount of business from one of our major RTLS customers would materially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost business.
The loss of a significant amount of business from one or more major customers, or a reduction in orders, could materially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost business.
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.
Insurers may dispute coverage, which may affect the timing or availability of insurance proceeds. Unexpected outcomes in legal proceedings, or changes in management’s evaluation of the likely outcomes, could have a material adverse effect on our business, financial condition, results of operations 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.
We may be a party to claims that arise from time to time in the ordinary course of our business, including claims related to our products, securities offerings, contracts and subcontracts, protection of confidential information or trade secrets, adversary proceedings arising from customer bankruptcies, employment matters, immigration requirements, and compliance with various state and federal statutes, rules and regulations applicable to our business.
Investors ’ expectations of our performance relating to environmental, social and governance ( “ ESG ” ) factors may impose additional costs and expose us to new risks. There is an increasing focus from investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to ESG matters.
Investors’ expectations and regulatory requirements relating to environmental, social and governance (“ESG”) matters may impose additional costs and expose us to new risks. There is increasing focus from investors, employees, customers, regulators and other stakeholders concerning corporate responsibility and ESG matters.
Our future success depends, in part, on our ability to increase revenues from existing RTLS customers by identifying additional opportunities to sell more of our RTLS products and services and on our ability to obtain new RTLS customers.
Our future success depends, in part, on our ability to increase revenues from existing customers by identifying additional opportunities to sell more of our UAS products and services, including drone platforms, cameras, sensors, software, training, repair and operational support services, and on our ability to obtain new customers.
The rate at which our customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including the perceived need for indoor mapping products and services, our ability to offer high quality products and services at competitive prices, meeting customers’ needs and expectations, the strength of our competitors, the capabilities of our sales and marketing departments and general economic conditions.
The rate at which customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including customer demand for UAS solutions, our ability to offer high-quality products and services at competitive prices, meeting customer needs and expectations, the strength of our competitors, the capabilities of our sales and marketing efforts, the availability of drone products from key suppliers, regulatory developments and general economic conditions.
Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us under the above provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us under the above provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. 45 The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.
GAAP and applicable U.S. securities laws and regulations; ● unanticipated costs to successfully integrate operations, technologies, personnel of acquired businesses and other assumed contingent liabilities; ● difficulty comparing financial reports due to differing financial and/or internal reporting systems; ● making any necessary modifications to internal financial control standards to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder; and/or ● possible tax costs or inefficiencies associated with integrating the operations of the combined company.
GAAP and applicable U.S. securities laws and regulations; ● unanticipated costs to successfully integrate operations, technologies, personnel of acquired businesses and other assumed contingent liabilities; ● difficulty comparing financial reports due to differing financial and/or internal reporting systems; ● making any necessary modifications to internal financial control standards to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder; ● the possibility that goodwill and other intangible assets we acquire are subject to amortization or impairment tests, which could result in future charges to earnings, or that the carrying amounts of goodwill and other purchased intangible assets may not be recoverable; and/or ● possible write-offs, restructuring charges, tax costs or inefficiencies associated with integrating the operations of the combined company.
We may be subject to damages resulting from claims that the Company or our employees have wrongfully used or disclosed alleged trade secrets of their former employers. We may be subject to claims that the Company or our employees may have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers or competitors.
We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
Federal, state, municipal and/or foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and regulations covering user privacy, data security, technologies that are used to collect, store and/or process data, and/or the collection, use, processing, transfer, storage and/or disclosure of data associated with individuals.
Federal, state, municipal and foreign governments and agencies have adopted, and may in the future adopt, modify, interpret or enforce laws, regulations and policies governing privacy, data security, cybersecurity, geolocation data, biometric data, surveillance technologies, and the collection, storage, use, processing, transfer and disclosure of data associated with individuals.
As a result, our ability to our pre-change federal NOLs and other tax attributes to offset future taxable income and taxes could be subject to limitations. Similar provisions of state tax law may also apply.
If an ownership change occurs, our ability to utilize our pre-change NOLs and other tax attributes, including research and development tax credits, to offset future taxable income and taxes could be subject to significant annual limitations. Similar provisions of state tax law may also apply.
The limitation of liability, or our indemnification, of our officers and directors may cause us to use corporate resources in a manner that conflicts with the interests of our stockholders.
These statutes could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us. The limitation of liability, or our indemnification, of our officers and directors may cause us to use corporate resources in a manner that conflicts with the interests of our stockholders.
We are also subject to the “acquisition of controlling interest” provisions of Sections 78.378 through 78.3793, inclusive, of the Nevada Revised Statutes, also known as the “control share” statute, which apply to “issuing corporations” that are Nevada corporations doing business, directly or through an affiliate, in Nevada, and having at least 200 stockholders of record, including at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation.
After the two-year period, but before four years, combinations remain prohibited but may also be permitted if the interested stockholder satisfies certain requirements with respect to the aggregate consideration to be received by holders of outstanding shares in the combination. 44 We are also subject to the “acquisition of controlling interest” provisions of Sections 78.378 through 78.3793, inclusive, of the Nevada Revised Statutes, also known as the “control share” statute, which apply to “issuing corporations” that are Nevada corporations doing business, directly or through an affiliate, in Nevada, and having at least 200 stockholders of record, including at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation.
Defects, errors, or vulnerabilities in our products or services or the failure of such products or services to prevent a security breach, could harm our reputation and adversely affect our results of operations.
Defects, errors or vulnerabilities in the products we distribute, service or develop, or the failure of such products to perform as expected, could harm our reputation and adversely affect our results of operations.
Although we have made certain strategic investments in the past, we do not currently believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company.
Although we have made certain strategic investments in the past and may from time to time hold significant cash or investment securities, including following strategic transactions, we do not currently believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act.
We have a history of losses, and in order to successfully execute our business plan, we will need to raise additional capital through additional debt or equity financing, which may otherwise not be available on reasonable terms or at all.
Any of these factors could have a material adverse effect on our business, financial condition and results of operations. 30 We have a history of losses, and in order to successfully execute our business plan, including strategic acquisitions and the development of our advanced systems and domestic manufacturing initiatives, we will need to raise additional capital through additional debt or equity financing, which may otherwise not be available on reasonable terms or at all.
A successful claim or claims brought against us in an amount exceeding available insurance coverage or protections under our contractual relationships could subject us to significant liabilities and could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
A successful claim or claims brought against us in excess of available insurance coverage or contractual protections, or for which such protections are unavailable, could result in significant liabilities, require us to expend substantial resources, and have a material adverse effect on our business, financial condition and results of operations.
Insurance and contractual protections may not always cover potential claims, lost revenue, increased expenses or liquidated damages payments, which could adversely affect our financial results.
Any of these factors could adversely affect our business, financial condition and results of operations. 28 Insurance and contractual protections may not cover product liability, operational claims, lost revenue, increased expenses or liquidated damages, which could adversely affect our financial results.
As a result, you will not receive any return on your investment prior to selling your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our Company. 33 Some provisions of our articles of incorporation and bylaws may deter takeover attempts, which may inhibit a takeover that stockholders consider favorable and limit the opportunity of our stockholders to sell their shares at a favorable price.
As a result, you will not receive any return on your investment prior to selling your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our Company.
The categories of data regulated under these laws vary widely, are often broadly defined, and subject to new applications or interpretation by regulators.
The scope of data regulated under these laws is often broadly defined, continues to evolve, and is subject to new applications and interpretations by regulators.
We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control).
We may have experienced ownership changes in the past, including in connection with business combinations, equity financings, preferred stock issuances, conversions, exchanges, or other transactions, and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside our control.
The success of our business and ability to expand our operations depend on our ability to attract, retain, train, educate, and motivate highly skilled employees, including employees who may become part of our organization in connection with our acquisitions.
The success of our business and our ability to execute our strategic plans depend on our ability to attract, retain, train, integrate and motivate highly skilled employees, including personnel who have joined or may join us in connection with acquisitions.
Flight test risks include (but are not limited to) stability and handling over the desired center-of-gravity range, performance extremes (stalls, balked-landing climb, single-engine climb), and flutter control effectiveness (aircraft roll effectiveness, controllability, various control failure safety). Delays in FAA certification can be expected to result in us incurring increased costs in attempting to correct any issues causing such delays.
These include (but are not limited to) ground test risks such as structural strength and fatigue resistance, and structural flutter modes. Flight test risks include (but are not limited to) stability and handling over the desired center-of-gravity range, performance extremes (stalls, balked-landing climb, single-engine climb), and flutter control effectiveness (aircraft roll effectiveness, controllability, various control failure safety).
Many existing potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to significantly greater financial, technical and marketing resources. Other manufacturers may be developing a light, fixed-wing, VTOL airplane with performance similar to that of the TriFan 600.
Many of our current and potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to significantly greater financial, technical and marketing resources.
Any inability to report and file our financial results accurately and timely could harm our reputation and adversely affect the trading price of our common stock. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud.
If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely affect the trading price of our common stock.
As part of our confidentiality-protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information. There can be no assurance that the steps we have taken will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable.
As a result, we may experience difficulty enforcing our copyrights against third-party infringement. As part of our confidentiality procedures, we enter into agreements with employees and consultants and limit access to and distribution of our software, documentation and other proprietary information. There can be no assurance that these measures will prevent misappropriation or that such agreements will be enforceable.
The RTLS industry in which we operate is characterized by rapid technological innovation, changing customer needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods.
We operate in highly competitive markets in both the UAS and the aerospace industries, which are characterized by rapid technological innovation, evolving customer requirements, changing industry standards and frequent introductions of new products, product enhancements, software capabilities and distribution models.
We are subject to numerous federal, state and foreign legal requirements on matters as diverse as data privacy and protection, employment and labor relations, immigration, taxation, anti-corruption, import/export controls, trade restrictions, internal control and disclosure control obligations, securities regulation and anti-competition. Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources.
We are subject to numerous U.S. federal, state and foreign legal and regulatory requirements, including laws relating to aviation and UAS operations, data privacy and protection, employment and labor relations, immigration, taxation, anti-corruption, import and export controls, trade restrictions, sanctions, internal control and disclosure obligations, securities regulation and competition laws.
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline. The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business.
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts.
Until this headroom grows over time, due to business growth or lower carrying value of the reporting unit, a relatively small decrease in reporting unit fair value can trigger impairment charges. When impairment charges are triggered, they tend to be material due to the size of the assets involved.
Until this difference increases over time due to business growth or reductions in the carrying value of the reporting unit, a relatively small decrease in fair value could trigger impairment charges.
We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders of our common stock, we cannot assure that such cash dividends will be paid on a timely basis.
We have never paid any dividends to our common stockholders as a public company. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future.
As required by current accounting standards, we review intangible assets for impairment either annually or whenever changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment to goodwill is higher during the early years following an acquisition.
As required by current accounting standards, we review goodwill and indefinite-lived intangible assets for impairment at least annually, and we evaluate long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Our management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain a competitive position. However, we may not receive significant revenue from these investments in the near future, or these investments may not yield the expected benefits, either of which could adversely affect our business and operating results.
We believe we must continue to dedicate significant resources to these efforts to maintain a competitive position and advance our UAS offerings. However, we may not receive significant revenue from these investments in the near future, if at all, and these investments may not yield the expected benefits.
We do not intend to pay cash dividends to our stockholders, so it is unlikely that stockholders will receive any return on their investment in our Company prior to selling our stock. We have never paid any dividends to our common stockholders as a public company.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares. 43 We do not intend to pay cash dividends to our stockholders, so it is unlikely that stockholders will receive any return on their investment in our Company prior to selling our stock.
The effects of these factors could render the conduct of our business in a particular country undesirable or impractical and have a negative impact on our business, financial condition and results of operations. If we do not adequately protect our intellectual property rights, we may experience a loss of revenue and our operations and growth prospects may be materially harmed.
If we do not realize the anticipated returns from our research and development efforts, our business, financial condition and results of operations could be materially adversely affected. If we do not adequately protect our intellectual property rights, we may experience a loss of revenue and our operations and growth prospects may be materially harmed.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board or as executive officers, and to maintain insurance at reasonable rates, or at all.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board or as executive officers, and to maintain insurance at reasonable rates, or at all. 46 If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
We continue to integrate the technology and operations acquired in connection with our recent acquisitions, including but not limited to the Legacy XTI technology and operations. This process involves complex operational, technological and personnel-related challenges, which are time-consuming and expensive and may disrupt our ongoing business operations.
We are in the process of integrating the operations of Drone Nerds into our business, and this process involves complex operational, technological and personnel-related challenges, which are time-consuming and expensive and may disrupt our ongoing business operations.
The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.
We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Exchange Act requires that we file annual, quarterly and current reports, proxy statements, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.
If our location-based security and detection products do not effectively interoperate with our customers ’ IT infrastructure, installations could be delayed or cancelled, which would harm our financial condition, operating results and growth prospects.
If the UAS products and solutions we distribute and support do not effectively interoperate with our customers’ systems and operational requirements, deployments could be delayed or cancelled, which would harm our financial condition, operating results and growth prospects.
Any defects, errors or vulnerabilities in our products could result in: ● expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work-around errors or defects or to address and eliminate vulnerabilities; ● delayed or lost revenue; ● loss of existing or potential customers or partners; ● increased warranty claims compared with historical experience, or increased cost of servicing warranty claims, either of which would adversely affect gross margins; and ● litigation, regulatory inquiries, or investigations that may be costly and harm our reputation. 26 Our current research and development efforts may not produce successful products or features that result in significant revenue, cost savings or other benefits in the near future.
Any defects, errors or vulnerabilities in products we distribute, service or develop could result in: ● expenditure of significant financial and operational resources to analyze, correct, replace or work around errors, defects or vulnerabilities; 18 ● delayed or lost revenue; ● loss of existing or potential customers, suppliers or strategic partners; ● increased warranty claims, returns, repair costs or service obligations, which could adversely affect gross margins; ● product recalls, regulatory scrutiny, or restrictions on product sales; and ● litigation, regulatory inquiries or investigations that may be costly and harm our reputation.
The TriFan 600 is still in the development stage, and we are still working to obtain FAA type certification of the TriFan 600. Certification by the FAA will be required for the sale of the TriFan 600 in the civil or commercial market in the United States.
The TriFan 600 aircraft program has been paused. To the extent we decide to resume the program, certification by the FAA will be required for the sale of the TriFan 600 in the civil or commercial market in the United States. The process to obtain such certification is expensive and time consuming and has inherent engineering risks.
We incurred net losses of approximately $35.6 million and $25.1 million for the fiscal years ended December 31, 2024 and 2023, respectively, and we had an accumulated deficit of approximately $93.6 million as of December 31, 2024. These losses and prior-year losses have resulted in significant negative cash flows.
We have incurred net losses in recent periods and have an accumulated deficit as of December 31, 2025. These and prior losses have resulted in significant negative cash flows.
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.
Regardless of the merits of any particular claim, responding to litigation may divert management’s time and attention, result in significant legal expenses, and expose us to monetary damages, penalties or injunctive relief. Litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements could materially adversely affect our business, financial condition, results of operations and cash flows.
We have been subject to government or regulatory investigations or inquiries under national, regional and local laws, as amended from time to time, and may be required to comply with data requests, or requests for information by government authorities and regulators in the United States or other jurisdictions in which we operate and any resulting enforcement action could have a materially adverse effect on us.
A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain products, which could severely harm our business. 35 We have been and may in the future be subject to government or regulatory investigations or inquiries and may be required to comply with requests for information by regulators, and any resulting enforcement action could have a materially adverse effect on us.
Although we maintain insurance and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance or the warranties, performance guarantees or risk sharing arrangements may not be adequate to cover potential claims, lost revenue, increased expenses or liquidated damages payments that may be required in the future.
Although we maintain insurance and seek to obtain warranties, indemnities and performance guarantees from suppliers and subcontractors, and where feasible attempt to allocate risks contractually to customers or other counterparties, the proceeds of such insurance or the protections provided by such contractual arrangements may not be adequate to cover potential claims, losses, liabilities or damages.
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.
Even if a claim is fully indemnified or insured, such litigation could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future. 36 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 exclusions, deductibles and caps.
To the extent that we are dependent on any single customer, we are subject to the risks faced by that customer to the extent that such risks impede the customer’s ability to stay in business and make timely payments to us.
To the extent that we are dependent on any significant customer, we are subject to the risks faced by that customer, including financial condition, funding availability and operational performance, which may impact the customer’s ability to make timely payments to us or continue purchasing our products and services.
Summary Risk Factors The following summarizes the risks and uncertainties that could materially adversely affect our business, financial condition, results of operation and stock price. You should read this summary together with the more detailed description of each risk factor contained below.
You should read this summary together with the more detailed description of each risk factor contained below.
If we or our customers fail to abide by these laws, it could result in litigation or regulatory or enforcement action against our customers or against us directly. Any actual or perceived failure by us to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us.
Any actual or perceived failure by us to comply with data privacy regulations could result in proceedings, investigations, enforcement actions or penalties against us.
In addition, any patents issued in the future may not provide us with any competitive advantages because our competitors may independently develop similar or alternative technologies or products that are equal to or superior to our TriFan 600 technology without infringing on any of our intellectual property rights or design around our proprietary technologies.
During the period in which the program is paused, third parties — including potential competitors — may develop technologies that are equal or superior to our TriFan 600-related intellectual property, design around our existing patents, or independently develop similar technologies without infringing our rights.
Changes in U.S. and foreign government administrative policy, including the imposition of or increases in tariffs and changes to existing trade agreements, and other changes to macroeconomic conditions could have a material adverse effect on global economic conditions and our business, results of operations, prospects and financial condition.
As a result, our business is sensitive to changes in U.S. and foreign government administrative policy, including changes to trade agreements, the imposition of new tariffs, increases in existing tariffs, import restrictions, retaliatory measures by foreign governments, and other actions affecting global trade.
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Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
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Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
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2024 filing
2025 filing
Biggest changeThese cybersecurity partners to the Company, including consultants and other third-party service providers, are a key part of XTI Aerospace’s cybersecurity risk management strategy and infrastructure and provide services including, maintenance of an IT assets inventory, periodic vulnerability testing, identity access management controls including restricted access of privileged accounts, physical security measures at Company facilities, information protection/detection systems including maintenance of firewalls and anti-malware tools, network and traffic monitoring and automated alerting, ongoing cybersecurity user awareness training, industry-standard encryption protocols, capacity management, formalized processes over asset and data destruction, formalized change management processes, data backups management, infrastructure maintenance, incident response, cybersecurity strategy, and cyber risk advisory, assessment and remediation.
Biggest changeWe also utilize third-party cybersecurity service providers and technology solutions to support our cybersecurity operations, including services related to: ● asset inventory management; ● network security, firewalls and endpoint protection; ● intrusion detection, monitoring and automated alerting; ● identity and privileged access management; ● vulnerability scanning and periodic testing; ● employee cybersecurity awareness training; ● encryption and data protection protocols; ● cloud infrastructure security; ● incident response support; and ● cybersecurity advisory and remediation services. 47 Because we rely on third-party vendors, cloud providers and service partners in our operations, we maintain a third-party risk management process designed to assess and monitor cybersecurity risks associated with critical service providers.
ITEM 1C: CYBERSECURITY XTI Aerospace maintains a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats. This program, in conjunction with the Company’s enterprise risk management assessment processes, addresses cybersecurity risks to the corporate information technology (“IT”) environment including systems, hardware, software, data, people, and processes.
ITEM 1C: CYBERSECURITY Risk Management and Strategy We maintain a cybersecurity risk management program designed to identify, assess, manage, mitigate and respond to cybersecurity threats. This program is integrated into our broader enterprise risk management processes and addresses risks to our corporate information technology (“IT”) environment, including systems, networks, hardware, software, data, personnel and operational processes.
XTI Aerospace faces risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation. XTI Aerospace acknowledges that the risk of cyber incidents is prevalent in the current threat landscape and that a future cyber incident may occur in the normal course of its business.
Cybersecurity Risks and Incidents We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation. These risks include, among others, ransomware attacks, business email compromise, supply chain attacks, insider threats, and data breaches affecting sensitive business, customer or employee information.
The underlying processes and controls of the XTI Aerospace’s cyber risk management program incorporate recognized best practices and standards for cybersecurity and IT, including the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”) and processes and controls supporting EU general data protection regulation requirements.
Our cybersecurity program incorporates recognized industry standards and best practices, including alignment with the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”). We also consider applicable data protection and privacy regulations in jurisdictions in which we operate.
In addition, XTI Aerospace maintains policies and procedures over areas such as information security, IT change and configuration management, acceptable use, access on/offboarding, accounts management, risk management, and data backup and recovery to help govern the processes put in place by management designed to protect XTI Aerospace’s IT assets, data, and services from threats and vulnerabilities.
We maintain policies and procedures governing areas such as information security, acceptable use, identity and access management, onboarding and offboarding, change and configuration management, risk management, data protection, backup and recovery, and incident response.
Removed
XTI Aerospace has an annual assessment performed by a third-party specialist of the Company’s cyber risk management program against the NIST CSF. The annual risk assessment identifies, quantifies, and categorizes material cyber risks.
Added
We engage independent third-party specialists to perform periodic assessments of our cybersecurity program, including evaluations against the NIST CSF and vulnerability testing. These assessments are designed to identify, quantify and categorize cyber risks and potential vulnerabilities. Based on the results of such assessments, management develops and implements risk mitigation and remediation plans, as appropriate.
Removed
In addition, the Company, in conjunction with the third-party cyber risk management specialists develop a risk mitigation plan to address such risks, and where necessary, remediate potential vulnerabilities identified through the annual assessment process.
Added
This includes vendor due diligence during onboarding, review of available independent audit reports (such as SOC reports, where applicable), evaluation of contractual security provisions, and ongoing monitoring of vendor performance and risk posture. Despite these efforts, we cannot eliminate all cybersecurity risks.
Removed
XTI Aerospace partners with industry recognized cybersecurity providers leveraging third-party technology and expertise.
Added
The threat landscape continues to evolve, and our systems and those of our third-party providers may be vulnerable to unauthorized access, disruption or compromise. Governance Management Oversight Management is responsible for the day-to-day oversight and administration of our cybersecurity risk management program. The Company utilizes a senior technology advisor as a consultant with primary responsibility for cybersecurity oversight.
Removed
XTI Aerospace’s management team, with the Executive Vice President of IT Operations in charge of primary oversight, in conjunction with third-party IT and cybersecurity service providers is responsible for oversight and administration of XTI Aerospace’s cyber risk management program, and for informing senior management and other relevant stakeholders regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents.
Added
This individual has extensive experience in information technology and cybersecurity. The senior technology advisor, together with internal personnel and external cybersecurity service providers, oversees the prevention, detection, mitigation and remediation of cybersecurity incidents. Management receives information from internal monitoring tools, third-party service providers, vulnerability assessments, and threat intelligence sources, including governmental and private sector resources.
Removed
The Company’s management team has prior experience selecting, deploying, and overseeing cybersecurity technologies, initiatives, and processes directly or via selection of strategic third-party partners, and also relies on threat intelligence as well as other information obtained from governmental, public or private sources, including external consultants engaged by XTI Aerospace for strategic cyber risk management, advisory and decision making.
Added
We maintain an incident response plan designed to provide a structured framework for identifying, escalating, investigating and responding to cybersecurity incidents, including processes to assess materiality and comply with applicable legal and regulatory reporting requirements. Board Oversight The Audit Committee of our Board of Directors oversees cybersecurity risk exposure and management’s efforts to monitor and mitigate cybersecurity risks.
Removed
Our Executive Vice President of IT Operations has over 25 years of experience serving in various roles in information technology and information security and has relevant experience in designing, deploying, and maintaining operations for critical IT systems, cloud infrastructure, virtualization technology, corporate networks, data protection, privacy, and governance.
Added
Management and, as appropriate, external cybersecurity advisors provide periodic briefings to the Audit Committee regarding: ● the effectiveness and status of our cybersecurity program; ● significant cybersecurity risks and vulnerabilities; ● emerging threat developments; and ● cybersecurity incidents, if any, and related response efforts.
Removed
XTI Aerospace has implemented third-party risk management processes to manage the risks associated with reliance on vendors, critical service providers, and other third-parties that may lead to a service disruption or an adverse cybersecurity incident.
Added
While the Board retains ultimate oversight responsibility for cybersecurity risk as part of its broader enterprise risk management function, it has delegated primary committee-level oversight to the Audit Committee, which reports to the Board on these matters.
Removed
This includes a third-party risk management policy which outlines required risk management processes, including assessment of vendors during the selection/onboarding process, review of SOC 1 reports on an annual basis, and a regular review of vendor contracts and compliance with service level agreements.
Added
To date, we have not identified any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, our business strategy, results of operations or financial condition. However, future incidents could occur, and there can be no assurance that our cybersecurity risk management measures will prevent or mitigate all potential incidents.
Removed
The Audit Committee of the Board of Directors oversees XTI Aerospace’s cybersecurity risk exposures and the steps taken by management to monitor and mitigate cybersecurity risks.
Added
In addition, evolving cybersecurity and data protection regulations may impose additional compliance, reporting and governance obligations on us, potentially increasing our costs and exposure to liability. For additional information regarding cybersecurity-related risks, see Item 1A. “Risk Factors.” 48
Removed
The cybersecurity stakeholders, including member(s) of management assigned with cybersecurity oversight responsibility and/or third-party consultants providing cyber risk services brief the Audit Committee on cyber vulnerabilities identified through the risk management process, the effectiveness of XTI Aerospace’s cyber risk management program, and the emerging threat landscape and new cyber risks on at least an annual basis.
Removed
This includes updates on XTI Aerospace’s processes to prevent, detect, and mitigate cybersecurity incidents. In addition, cybersecurity risks are reviewed by XTI Aerospace’s Board of Directors at least annually, as part of the Company’s corporate risk oversight processes.
Removed
However, prior cybersecurity incidents have not had a material adverse effect on XTI Aerospace’s business, financial condition, results of operations, or cash flows.
Removed
The Company proactively seeks to detect and investigate unauthorized attempts and attacks against IT assets, data, and services, and to prevent their occurrence and recurrence where practicable through changes or updates to internal processes and tools and changes or updates to service delivery; however, potential vulnerabilities to known or unknown threats will remain.
Removed
Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, investors, and additional stakeholders, which could subject the Company to additional liability and reputational harm. In response to such risks, the Company has implemented initiatives such as implementation of the cybersecurity risk assessment process and development of an incident response plan. See Item 1A.
Removed
“Risk Factors” for more information on cybersecurity risks. 37
Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2024 filing
2025 filing
Removed
ITEM 2: PROPERTIES We lease office space in several locations in the United States, including Palo Alto, California and Englewood, Colorado, where we house our principal headquarters, sales and marketing and certain administrative functions. We also lease certain property Berlin, Germany through our subsidiary Inpixon GmbH for research and development, sales, marketing and administrative activities.
Added
ITEM 2: PROPERTIES Our principal executive offices are located in Addison, Texas, where we lease office space supporting corporate management and administrative functions. Through our ADS subsidiary (formerly XTI Aircraft), we operate from a leased facility located at the Chester County Airport in Coatesville, Pennsylvania, which supports engineering and related activities associated with design, development, and integration of unmanned platforms.
Removed
The Company also has offices in Eschborn, Germany through our subsidiary IntraNav. We believe our facilities are adequate for our current and reasonably anticipated future needs.
Added
Our UAS operations, conducted primarily through Drone Nerds, are headquartered in the Miami–Fort Lauderdale metropolitan area of Florida. Drone Nerds operates three primary leased facilities in that region, including its headquarters, a retail showroom location and a dedicated service and repair center. These facilities support product distribution, inventory storage, training, repair and lifecycle support operations.
Added
We no longer lease office space in Palo Alto, California or in Germany, and we do not currently maintain any leased facilities outside of the United States. We believe our existing facilities are adequate for our current operations and reasonably anticipated near-term needs.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2024 filing
2025 filing
Biggest changeOn 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.
Biggest changeXeriant asserts causes of action for breach of contract, fraud, unjust enrichment, and misappropriation of confidential information, and seeks damages in excess of $500 million, along with injunctive and other equitable relief. On March 13, 2024, Legacy XTI moved to dismiss portions of the second amended complaint. The S.D.N.Y. denied that motion on January 14, 2025.
(“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.
(“Xeriant”) filed a complaint in the United States District Court for the Southern District of New York (the “S.D.N.Y.”) against Legacy XTI, two unnamed entities, and five unnamed individuals. On January 31, 2024, Xeriant filed an amended complaint adding the Company 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.
On February 29, 2024, Xeriant filed a second amended complaint, removing the Company and one of the unnamed entities as defendants.
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 Letter Agreement, in addition to the other aforementioned agreements.
Xeriant further alleges that it provided intellectual property, expertise, and capital in connection with Legacy XTI’s TriFan 600 aircraft and was improperly excluded from a subsequent transaction involving the TriFan 600 technology as part of Legacy XTI’s merger with the Company.
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 agreement.
The second amended complaint alleges that Legacy XTI breached several agreements with Xeriant, including a Joint Venture Agreement dated May 31, 2021, a cross-patent license agreement, an operating agreement, and a letter dated May 17, 2022, which Xeriant claims arose from its introduction of Legacy XTI to a Nasdaq-listed company as a potential acquirer.
Removed
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.
Added
Legacy XTI filed an answer on January 28, 2025, and subsequently filed an amended answer and counterclaims on February 18, 2025. The amended counterclaims, further amended on April 14, 2025, allege that Xeriant breached the Joint Venture Agreement by failing to make required capital contributions of approximately $4.6 million and by failing to deliver promised intellectual property and strategic support.
Removed
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.
Added
Legacy XTI further alleges that Xeriant breached its fiduciary duty by engaging in coercive and self-dealing conduct, including conditioning a strategic introduction on the issuance of equity and assumption of debt.
Removed
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.
Added
Legacy XTI seeks declaratory relief confirming that the joint venture has been terminated, that all intellectual property related to the TriFan 600 belongs solely to Legacy XTI, and that Xeriant has no rights in the TriFan 600 technology. On April 28, 2025, Xeriant moved to dismiss Legacy XTI’s second amended counterclaims.
Removed
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”).
Added
On September 23, 2025, the S.D.N.Y. denied Xeriant’s motion, concluding that Legacy XTI plausibly alleged claims against Xeriant for breach of contract, breach of fiduciary duty, and declaratory judgment.
Removed
In the Arbitration, Chardan alleges that the Company is bound by the Agreement even though it did not sign the Agreement, which the Company denies. Chardan further alleges that Aircraft and the Company breached the Agreement by not making certain payments to Chardan.
Added
The S.D.N.Y. found that Legacy XTI had adequately pleaded that Xeriant was obligated to contribute $10 million in funding to the joint venture and that it acted disloyally by leveraging a potential merger opportunity for its own benefit. Following the S.D.N.Y.’s September 23, 2025 denial of Xeriant’s motion to dismiss Legacy XTI’s counterclaims, the litigation has advanced into full discovery.
Removed
Chardan also seeks to recover unspecified amounts relating to an alleged right of first refusal to perform banking services in connection with certain offerings of its securities that the Company supposedly did not honor. The Company filed a petition in the U.S.
Added
The S.D.N.Y. has since compelled Xeriant to comply with its discovery obligations and warned that continued noncompliance would result in dismissal of its claims.
Removed
District Court for the Southern District of New York seeking to stay the Arbitration to the extent that it has been asserted against the Company.
Added
While the Company continues to believe the allegations against Legacy XTI are meritless, the case remains in active discovery and subject to close judicial supervision, which may increase litigation costs and extend the duration of the proceedings.
Removed
On or about January 21, 2025, the Court entered a final judgement 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. The Aircraft subsidiary remains as a party to the arbitration and intends to defend against the arbitration vigorously.
Added
On December 9, 2025, Xeriant filed a Third Amended Complaint, voluntarily non-suiting five counts from the prior complaint and revising its damages demand from $500 million to an unspecified amount. On December 23, 2025, Legacy XTI filed its Answer, Affirmative Defenses, and Counterclaims in response to the Third Amended Complaint. Discovery remains ongoing.
Removed
ITEM 4: MINE SAFETY DISCLOSURES Not applicable. 38 PART II
Added
The outcome of the litigation cannot presently be predicted, and any adverse determination could have a material impact on the Company. 49 In connection with the litigation matter described in the immediately preceding paragraph, on June 12, 2024, the Company received correspondence from legal counsel for Auctus Fund, LLC (“Auctus”), dated April 3, 2024, asserting that the Company and/or Legacy XTI may have assumed Xeriant’s obligations under a Senior Secured Promissory Note (the “Note”) issued by Xeriant to Auctus in the original principal amount of $6,050,000, pursuant to a letter agreement dated May 17, 2022, between Xeriant and Legacy XTI (the “May 17 letter”).
Added
Auctus claimed that the outstanding amount due under the Note, including accrued interest, was $8,435,008.81 as of April 3, 2024. In July 2024, Legacy XTI responded to Auctus’s claims, asserting that the May 17 letter is invalid and unenforceable on multiple grounds.
Added
Legacy XTI further stated that, even if the May 17 letter were enforceable, it did not create or trigger any obligation for Legacy XTI to assume Xeriant’s debt under the Note or otherwise.
Added
On May 13, 2025, Auctus filed a lawsuit against Legacy XTI in the District Court of Arapahoe County, Colorado, asserting a single claim for breach of contract based on its prior allegations.
Added
Auctus contends that Legacy XTI is contractually obligated to repay nearly $9 million in principal and accrued interest, based on Legacy XTI’s entry into a loan agreement with Legacy Inpixon in March 2023 and its subsequent merger with Legacy Inpixon in March 2024.
Added
On June 25, 2025, Legacy XTI filed a motion to dismiss or, in the alternative, to stay the proceedings pending resolution of the Xeriant litigation.
Added
Legacy XTI’s motion asserts that Auctus’ complaint should be dismissed: (i) for lack of standing, because Auctus is neither a party to, nor a third-party beneficiary of, the May 17 letter; (ii) for failure of a condition precedent, because no obligation ever arose in that the alleged triggering condition—a business combination involving Legacy XTI and Legacy Inpixon did not occur within the required one-year time frame; (iii) for lack of valid assignment, because Xeriant’s unilateral assignment of debt to Legacy XTI is void because the underlying Note prohibits assignment without Auctus’s prior written consent, which is not alleged.
Added
On August 5, 2025, Auctus filed a response arguing that it was an intended third-party beneficiary of the May 17 letter, that the anti-assignment clause does not bar its claims, and that the request for a stay is unwarranted because the Xeriant litigation involves different parties and broader claims.
Added
On September 12, 2025, Legacy XTI filed a Reply Brief reinforcing that Auctus lacks standing, that no obligation ever arose under the May 17 Letter because no qualifying transaction occurred within its one-year term, and that any purported transfer of debt is void under the Note’s anti-assignment clause.
Added
The Reply also emphasized that the enforceability of the May 17 Letter is already before the S.D.N.Y. and urged dismissal or a stay to avoid inconsistent rulings.
Added
On October 2, 2025, Legacy XTI filed a Notice of Supplemental Authority submitting the September 23, 2025 Order of the S.D.N.Y., which denied Xeriant’s motion to dismiss Legacy XTI’s counterclaims and held that Legacy XTI had plausibly alleged that the May 17 Letter expired by its terms and is unenforceable.
Added
Legacy XTI asserted that the S.D.N.Y. ruling directly supports dismissal or a stay because it confirms that the same alleged contract and issues raised by Auctus are already being adjudicated in the federal case. On November 7, 2025, the court denied Legacy XTI’s motion to dismiss or, in the alternative, stay the proceedings.
Added
The court held that, when viewing the allegations in the light most favorable to Auctus, the complaint plausibly stated claims for relief under Colorado’s notice-pleading standard.
Added
The court further denied Legacy XTI’s alternative request for a stay, reasoning that the parties were not identical to those in the federal action and therefore comity and judicial economy did not warrant a stay.
Added
The court nonetheless directed the parties to update it regarding the outcome of the federal case to the extent it may be dispositive of overlapping issues. On November 21, 2025, Legacy XTI filed its Answer and Affirmative Defenses to the Complaint. The parties are engaged in discovery.
Added
The Company will continue to vigorously defend against the claims but cannot predict the timing or outcome of the proceedings or estimate any potential exposure.
Added
In February 2026, the State of Texas filed a petition in the District Court of Collin County, Texas, against Anzu Robotics, LLC (“Anzu”) alleging that Anzu violated the Texas Deceptive Trade Practices-Consumer Protection Act (the “DTPA”) in connection with the marketing and sale of its drone products.
Added
The State contends, among other things, that Anzu misrepresented certain characteristics, origins, and security features of its products and failed to disclose certain alleged material facts relating to the products’ development and components and Anzu’s alleged business relationship with DJI.
Added
The State seeks temporary and permanent injunctive relief, civil penalties of up to $10,000 per violation of the DTPA and up to an additional $250,000 if the conduct was calculated to deprive a consumer age 65 or older of money or property, and attorneys’ fees and costs.
Added
The Company is engaged in discussions with the Texas Attorney General to attempt to resolve the matter cooperatively. The Company cannot at this time predict the outcome of this matter or reasonably estimate a range of potential loss, if any. ITEM 4: MINE SAFETY DISCLOSURES Not applicable. 50 PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed2 unchanged
2024 filing
2025 filing
Biggest changeHolders of Record According to our transfer agent, as of April 11, 2025, we had approximately 1,719 shareholders of record of our common stock. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name. Our stock transfer agent is Computershare Trust Company, N.A., 150 Royall Street, Suite 101, Canton, MA 02021.
Biggest changeThis number does not include an indeterminate number of shareholders whose shares are held by brokers in street name. Our stock transfer agent is Computershare Trust Company, N.A., 150 Royall Street, Suite 101, Canton, MA 02021.
Recent Sales of Unregistered Securities and Use of Proceeds During the period covered by this Annual Report on Form 10-K, we have not sold any equity securities that were not registered under the Securities Act that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Recent Sales of Unregistered Securities and Use of Proceeds During the period covered by this Annual Report, we have not sold any equity securities that were not registered under the Securities Act that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Holders of Series 4 Convertible Preferred Stock and Series 5 Convertible Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by our Board. Securities Authorized for Issuance under Equity Compensation Plans For information required by this item with respect to our equity compensation plans, please see Item 11 of this report.
Holders of Series 4 Convertible Preferred Stock and Series 5 Convertible Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by our Board. Securities Authorized for Issuance under Equity Compensation Plans For information required by this item with respect to our equity compensation plans, please see Item 11 of this Annual Report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We had no share repurchase activity for the three months ended December 31, 2024. ITEM 6: [RESERVED]
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We had no share repurchase activity for the three months ended December 31, 2025. ITEM 6: [RESERVED] 51
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock currently trades under the symbol “XTIA” on the Nasdaq Capital Market. Prior to the XTI Merger, our common stock traded under the symbol “INPX” on the Nasdaq Capital Market.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock currently trades under the symbol “XTIA” on the Nasdaq Capital Market. Holders of Record According to our transfer agent, as of March 31, 2026, we had approximately 1,600 shareholders of record of our common stock.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
14 edited+159 added−141 removed2 unchanged
2024 filing
2025 filing
Biggest changeSince the date of the Equity Distribution Agreement through the date of this report, the Company sold 1,170,561 shares of common stock at per share prices between approximately $4.10 and $465.56 under the Equity Distribution Agreement, resulting in gross proceeds of approximately $52.2 million. 49 Liquidity and Capital Resources The Company’s net cash flows used in operating, investing and financing activities for the years ended December 31, 2024 and 2023 and certain balances as of the end of those periods are as follows (in thousands): For the Years Ended December 31, 2024 2023 Net cash used in operating activities $ (22,307 ) $ (4,181 ) Net cash provided by (used in) investing activities 2,853 (17 ) Net cash provided by financing activities 23,564 4,088 Effect of foreign exchange rate changes on cash (10 ) — Net increase (decrease) in cash and cash equivalents $ 4,100 $ (110 ) As of December 31, As of December 31, 2024 2023 Cash and cash equivalents $ 4,105 $ 5 Working capital deficit $ (8,840 ) $ (13,028 ) Operating Activities for the year ended December 31, 2024 Net cash used in operating activities during the year ended December 31, 2024 was approximately $22.3 million.
Biggest changeHistorical Cash Flows The Company’s net cash flows used in operating, investing and financing activities for the years ended December 31, 2025 and 2024 and certain balances as of the end of those periods are as follows (in thousands): For the Years Ended December 31, 2025 2024 Net cash used in operating activities $ (36,611 ) $ (22,307 ) Net cash (used in) provided by investing activities (18,762 ) 2,853 Net cash provided by financing activities 68,210 23,564 Effect of foreign exchange rate changes on cash (23 ) (10 ) Net increase in cash and cash equivalents $ 12,814 $ 4,100 66 As of December 31, As of December 31, 2025 2024 Cash and cash equivalents $ 16,696 $ 3,972 Working capital (deficit) $ 4,220 $ (8,840 ) Operating Activities for the year ended December 31, 2025 Net cash used in operating activities was approximately $36.6 million for the year ended December 31, 2025, compared to approximately $22.3 million for the year ended December 31, 2024.
Critical Accounting Policies and Estimates Our 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.
In evaluating the need for any valuation allowance, management will assess whether it is more likely than not that some portion, or all, of the deferred tax asset may not be realized on a jurisdictional basis.
We assess the realizability of deferred tax assets and establish a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Cash flows related to investing activities during the year ended December 31, 2024 consist primarily of the cash assumed from Legacy Inpixon in connection with the XTI Merger. Cash Flows from Financing Activities as of December 31, 2024 and 2023 Net cash flows provided by financing activities during the year ended December 31, 2024 was $23.6 million.
Cash Flows from Financing Activities as of December 31, 2025 and 2024 Net cash provided by financing activities was approximately $68.2 million for the year ended December 31, 2025, compared to approximately $23.6 million for the year ended December 31, 2024.
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 financial statements, which are included in this report beginning on page F-1.
RECENTLY ISSUED ACCOUNTING STANDARDS For a discussion of recently issued accounting pronouncements, please see Note 3 to our financial statements, which are included in this Annual Report beginning on page F-1.
Our actual results may differ materially from those anticipated in these forward-looking statements, due to a number of factors, including but not limited to, risks described in the section entitled “ Risk Factors. ” 39 Overview of Our Business The Company is primarily an aircraft development company.
Our actual results may differ materially from those anticipated in these forward-looking statements, due to a number of factors, including but not limited to, risks described in the section entitled “Risk Factors. ” OVERVIEW OF OUR BUSINESS XTI Aerospace, Inc. is a U.S.-based aerospace company focused on building and scaling a market-leading UAS solutions platform serving enterprise, public safety, government, and defense customers, while maintaining long-term optionality in advanced vertical lift aircraft development.
Business Combinations We account for business combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill.
Under this method, the identifiable assets acquired and liabilities assumed are recorded at their estimated fair values as of the acquisition date.
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.
Long-lived assets and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For long-lived assets held and used, recoverability is assessed by comparing the carrying amount of the asset group to the expected undiscounted future cash flows expected to be generated by the asset group.
Historically changes in management estimates have not been material. 42 Revenue Recognition 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.
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration we expect to receive in exchange for those goods or services.
Other income (expense), net consists of miscellaneous income and expense items. Results of Operations Year Ended December 31, 2024 compared to the Year Ended December 31, 2023 The Company determined the previously disclosed XTI Merger should be accounted for as a reverse acquisition with Legacy XTI being considered the accounting acquirer.
Year Ended December 31, 2025 compared to the Year Ended December 31, 2024 Comparability of Financial Information On March 12, 2024, we completed the XTI Merger, which was accounted for as a reverse acquisition with Legacy XTI treated as the accounting acquirer and the Company (formerly Inpixon) treated as the accounting acquiree.
During the year ended December 31, 2024, the Company received incoming cash flows of approximately $22.2 million from the ATM, $2.0 million from promissory notes issued to Streeterville Capital, LLC, and approximately $1.0 million in proceeds from an existing promissory note arrangement with Legacy Inpixon.
Financing cash inflows during 2024 were primarily attributable to approximately $22.2 million of net proceeds from ATM stock offerings, $2.0 million of proceeds from the issuance of promissory notes, and approximately $1.0 million received under a loan arrangement with Legacy Inpixon prior to the XTI Merger. These inflows were partially offset by debt repayments and preferred stock redemptions.
Provision for Income Taxes There was an income tax provision of approximately $0.02 million for the year ended December 31, 2024 compared to an income tax benefit of $0.0 for the comparable period in the prior year.
The absence of a comparable fair value gain in 2025 contributed to the year-over-year decline. Other income (expense) may fluctuate significantly in future periods based on financing activities and fair value remeasurement of certain financial instruments. Income Taxes Income tax benefit (provision) was approximately $0.01 million in 2025 compared to an income tax provision of $0.02 million in 2024.
For the year ended December 31, 2024, the Company had a net loss of approximately $35.6 million. During the year ended December 31, 2024, the Company used approximately $22.3 million of cash for operating activities. There can be no assurances that the Company will ever earn revenues sufficient to support its operations, or that it will ever be profitable.
Operating Activities for the year ended December 31, 2024 Net cash used in operating activities was approximately $22.3 million for the year ended December 31, 2024. Operating cash usage in 2024 was primarily driven by the Company’s net loss of approximately $35.6 million, partially offset by non-cash expenses of approximately $5.8 million.
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.
We base these estimates on historical experience, current trends, and other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates, and such differences could be material. Our significant accounting policies are described in the notes to our audited consolidated financial statements included elsewhere in this Annual Report.
Removed
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.
Added
The Company manages its operations through two reportable segments: Unmanned Aircraft Systems (“UAS”) and Commercial Aviation. These segments reflect the Company’s distinct business models, capital requirements and growth drivers.
Removed
We are primarily engaged 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, 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.
Added
Our core business currently consists of: ● Unmanned Aircraft Systems - an established UAS solutions and services platform operated through our majority-owned subsidiary, XTI Drones Holdings, LLC, providing enterprise drone distribution, training, compliance management support, repair and maintenance, fleet sustainment and related services, and ● Commercial Aviation - a development-stage VTOL aircraft program focused on the TriFan 600, a fixed-wing aircraft design concept intended to combine the vertical takeoff and landing capability of a helicopter with the speed and range of a conventional business aircraft, operated through our wholly-owned subsidiary, XTI Aircraft Company.
Removed
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.
Added
During 2024 and 2025, the Company underwent a series of transactions that changed our operating profile, revenue base, and capital allocation priorities.
Removed
By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations. We experienced a net loss from operations of approximately $37.0 million and $7.6 million for the years ended December 31, 2024 and 2023, respectively.
Added
Corporate Transformation On March 12, 2024, we completed a merger (the “XTI Merger”) with XTI Aircraft Company (“Legacy XTI”) that was accounted for as a reverse acquisition, with Legacy XTI treated as the accounting acquirer and the Company (formerly Inpixon) treated as the accounting acquiree.
Removed
We cannot assure that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In order to continue our operations, we have supplemented the revenues we earned with proceeds from the sale of our equity and proceeds from loans.
Added
As a result, our consolidated financial statements reflect (i) the historical financial statements of Legacy XTI prior to the closing date and (ii) the consolidated results of the combined company following the closing date.
Removed
Recent Events March 2025 Underwritten Offering and Debt Repayment On March 28, 2025, we entered into an underwriting agreement with ThinkEquity LLC (“ThinkEquity”), 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, 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.
Added
In November 2025, we completed the acquisition of Drone Nerds, LLC and Anzu Robotics, LLC (collectively, “Drone Nerds”) with Anzu Robotics, LLC having been affiliated with Drone Nerds, LLC (then known as Drone Nerds, Inc.) prior to the acquisition. The Company owns an 83.403% controlling interest in the XTI Drones Holdings subsidiary, with the remaining equity reflected as noncontrolling interest.
Removed
The combined public offering price for each share of common stock, 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 of common stock, or a Pre-funded Warrant in lieu thereof, was sold together with one Common Warrant.
Added
The acquisition of Drone Nerds represents a significant strategic shift. Prior to the acquisition, our operations were primarily focused on our Inpixon Business and the development of the TriFan 600 aircraft and other aerospace technologies. With the acquisition of Drone Nerds, we transitioned our focus towards scaling Drone Nerds’ revenue-generating UAS solutions platform.
Removed
The March Offering was made pursuant to our registration statement on Form S-3 (File No 333-279901), filed with the SEC on May 31, 2024, as amended on June 14, 2024 and declared effective on June 18, 2024 (the “Current Shelf Registration Statement”), the base prospectus included therein, a preliminary prospectus supplement dated March 27, 2025 and a final prospectus supplement dated March 28, 2025.
Added
Because Drone Nerds was acquired in November 2025, our consolidated results for the year ended December 31, 2025 include Drone Nerds’ results only from the acquisition date through year-end. Accordingly, GAAP revenues, cost of revenues, and operating expenses for 2025 do not reflect a full year of UAS operations at scale.
Removed
The March Offering closed on March 31, 2025. We received net proceeds of approximately $3.3 million from the March Offering after deducting the underwriting discounts and commissions and other expenses payable by us.
Added
In conjunction with the acquisition of Drone Nerds, we also recognized the challenge of the long-term financing requirements of developing a VTOL aircraft and the opportunities in the unmanned systems market in the near term.
Removed
We 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.
Added
Late in 2025, we began building a core capability around the design, development, and production of unmanned platforms, with an emphasis on serving defense customers and supporting domestic procurement initiatives aligned with U.S. national security priorities. During December 2025, the Company committed to a plan to dispose of its historical Inpixon Business and classified the business as held for sale.
Removed
The Pre-funded Warrants were immediately exercisable upon issuance, have an exercise price of $0.001 per share and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. The Common Warrants were immediately exercisable upon issuance, have an exercise price of $1.36 per share, and expire on the fifth anniversary of the date of issuance.
Added
The results of the Inpixon Business are presented as discontinued operations in the consolidated financial statements for all periods presented. As a result of these transactions, our current operating profile differs materially from prior periods, and historical results may not be fully comparable.
Removed
As a result of our failure to timely file a Current Report on Form 8-K, upon the filing of this Annual Report on Form 10-K, we became ineligible to file new short form registration statements on Form S-3 or to use the Current Shelf Registration Statement.
Added
Accordingly, in addition to reviewing our GAAP results, management evaluates performance and allocates capital with an emphasis on: 52 ● Revenue growth and channel mix within the UAS platform. ● Gross margin expansion through service attachment and lifecycle support. ● Working capital efficiency and liquidity management. ● Disciplined allocation of capital between UAS scaling initiatives and TriFan development.
Removed
Therefore, we agreed to file a subsequent registration statement covering the issuance of the shares issuable upon exercise of the Pre-funded Warrants and the Common Warrants within the timeframes set forth in such warrants.
Added
UAS Solutions Platform Through Drone Nerds, we operate an established enterprise-focused UAS solutions platform in the United States. Our operating model is designed to provide end-to-end UAS lifecycle capabilities across hardware distribution, operator training, compliance management support, repair and maintenance, fleet sustainment, and related support services. We operate an OEM-agnostic, multi-vendor ecosystem supporting more than 50 hardware and software manufacturers.
Removed
As of April 11, 2025, 1,126,000 Pre-funded Warrants remained outstanding and unexercised. 40 As part of its compensation for serving as representative in connection with the March Offering, we issued ThinkEquity and its designees Representative Warrants to purchase up to 147,060 shares of common stock.
Added
This positioning enables us to serve enterprise and public sector customers navigating evolving regulatory requirements, supply chain considerations, and procurement restrictions. Our strategy is aligned with our broader Vertical Economy™ vision, which encompasses vertical lift technologies and supporting infrastructure across unmanned and manned aircraft platforms.
Removed
The Representative Warrants were immediately exercisable upon issuance, have an exercise price of $1.70 per share and expire on the five-year anniversary of the commencement of sales of the securities issued in the March Offering.
Added
While our long-term vision includes broader participation across the vertical lift ecosystem, our near-term operating focus is centered on scaling our UAS platform with disciplined capital allocation and margin optimization.
Removed
January 2025 Registered Direct Offering On January 7, 2025, we entered into a placement agency agreement with ThinkEquity, as placement agent, pursuant to which we 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.
Added
We believe the UAS market is undergoing structural evolution driven by: ● Increasing enterprise adoption of drones for inspection, safety, and operational efficiency ● Regulatory developments affecting fleet eligibility and operational approvals ● Growing emphasis on secure and compliant procurement in government and defense channels ● Customer demand for integrated lifecycle solutions rather than standalone hardware transactions Our integrated model is designed to address these trends by positioning us as a long-term solutions partner rather than a transactional reseller.
Removed
The January Offering closed on January 10, 2025, following the effectiveness of the 1-for-250 reverse stock split of our outstanding common stock on the same date, which was a condition to the closing of the January Offering. We received net proceeds of approximately $18.3 million from the January Offering.
Added
TriFan 600 VTOL Program As of early 2026, the TriFan 600 program has been paused. Whether and when development may resume will depend on a number of factors, including capital availability, market conditions for advanced air mobility, and the Company’s overall strategic priorities at the relevant time.
Removed
The January Offering was made pursuant to the Current Shelf Registration Statement, the base prospectus included therein, and a prospectus supplement dated January 7, 2025.
Added
While the TriFan 600 remains a strategic long-term asset within our broader vertical lift vision, our current revenue base and operating execution are centered on our UAS solutions platform.
Removed
As part of its compensation for acting as placement agent for the January Offering, we issued ThinkEquity LLC and its designees Placement Agent Warrants to purchase 72,727 shares of common stock, which were immediately exercisable upon issuance, have an exercise price of $17.1875 per share and expire on the five-year anniversary of the commencement of sales of the securities issued in the January Offering.
Added
Capital Allocation and Liquidity Strategy During 2025, we completed multiple public offerings and a Series 10 Convertible Preferred Stock financing, which generated an aggregate of approximately $85.5 million in net proceeds, strengthening our liquidity and supporting our strategic initiatives, including the Drone Nerds acquisition and working capital stabilization.
Removed
Settlement Agreement On March 27, 2025 (the “Effective Date”), XTI Aerospace, Inc. (the “Company”) entered into a settlement agreement with 3AM Investments LLC (an entity controlled by Nadir Ali (“Ali”), the Company’s former Chief Executive Officer and a former director of the Company) (“3AM”), Grafiti Group LLC (“Grafiti Group”) and Ali (the “Settlement Agreement”).
Added
Our operating priorities are focused on: ● Strengthening and scaling our UAS platform. ● Improving margin profile and recurring revenue mix. ● Managing operating expenses and cash burn. ● Preserving long-term vertical lift optionality.
Removed
The terms of the Settlement Agreement include: Preferred Stock Redemption.
Added
Our near-term objective is to move toward improved operating cash flow sustainability within the UAS segment while maintaining disciplined investment in our other programs, which may require additional capital over time. 53 RECENT DEVELOPMENTS Sale of Inpixon Business .
Removed
The Company and 3AM entered into that certain securities purchase agreement dated as of March 12, 2024 (the “Series 9 Purchase Agreement”), pursuant to which 3AM acquired 1,500 shares of the Company’s Series 9 Preferred Stock, of which 1,164.12 shares of Series 9 Preferred Stock were issued and outstanding as of March 27, 2025 (the “Outstanding Preferred Stock”).
Added
In February 2026, we completed the sale of our historical Inpixon Business, which had been classified as discontinued operations during the fourth quarter of 2025. The transaction furthered our strategic repositioning toward a focused aerospace and UAS platform. The final purchase price remains subject to customary post-closing adjustments. Board and Leadership Changes.
Removed
Pursuant to the Settlement Agreement, on the Effective Date, the Company delivered the aggregate amount of $1,251,651.26 (the “Series 9 Redemption Amount”) by wire transfer of immediately available funds to an account designated in writing by Ali, for the redemption of the Outstanding Preferred Stock.
Added
Clinton Weber was elected to our Board of Directors at our 2025 annual meeting of stockholders held on December 30, 2025. In February 2026, we appointed Jonathan Ornstein to our Board of Directors.
Removed
Following Ali’s receipt of the Series 9 Redemption Amount, Ali no longer held any shares of Series 9 Preferred Stock. As of the date of this report, there are no shares of Series 9 Preferred Stock issued and outstanding. Termination of Ali Consulting Agreement.
Added
In addition, Soumya Das resigned from his position as Chief Executive Officer of the Inpixon Business and from the Company’s Board of Directors in connection with the disposition of that business. Asset-Based Credit Facility. In February 2026, we entered into a new secured asset-based revolving credit facility with JPMorgan Chase Bank, N.A. (the “ABL Facility”).
Removed
The Settlement Agreement provides that effective as of the Effective Date, that certain Consulting Agreement, dated March 12, 2024 by and between the Company and Ali (the “Ali Consulting Agreement”) is terminated, and in lieu of the $2,775,000 (the “Ali Advisory Fees”) that would be owed to Ali pursuant to the terms of the Ali Consulting Agreement as a result of the termination of such Ali Consulting Agreement prior to the 15 month anniversary of the effective date thereof, the Company agreed (i) that the aggregate amount of $1,000,000 (the “Grafiti Purchase Amount”) required to be delivered by Grafiti Group pursuant to that certain Equity Purchase Agreement, dated February 16, 2024, by and among the Company, Grafiti LLC, and Grafiti Group, as amended (the “Equity Purchase Agreement”), 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; (ii) to deliver a cash amount of $60,000 (the “Outstanding Amount”) to Ali by wire transfer of immediately available funds; and (iii) to deliver $1,500,000 (the “Deferred Amount”) by wire transfer of immediately available funds in three equal installments of $500,000 (“Installment Amounts”) each on June 30, 2025, September 30, 2025 and December 30, 2025 (the “Deferred Amount Installment Dates”).
Added
The ABL Facility provides for a revolving line of credit of up to $20.0 million, subject to a borrowing base calculated primarily on eligible accounts receivable and inventory, and includes customary covenants and reporting requirements. Subject to lender approval and the terms of the underlying credit agreement, the facility may be increased by up to an additional $25.0 million.
Removed
Any Installment Amount that is not paid by the applicable due dates will be subject to interest at a rate of 18% per annum.
Added
The ABL Facility is intended to enhance our working capital flexibility, support inventory procurement and growth within our UAS platform, and strengthen overall liquidity management. Borrowings under the facility bear interest at variable rates based on applicable benchmark rates plus an agreed margin. Warrant Exercises.
Removed
Upon payment of the Outstanding Amount and 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.
Added
Subsequent to December 31, 2025 and through the date of this filing, holders of certain warrants issued in connection with our 2025 public offerings exercised warrants to purchase 3,963,408 shares of the Company’s common stock. These exercises resulted in aggregate cash proceeds to us of approximately $7.9 million.
Removed
On March 31, 2025, the Company paid the Outstanding Amount in full. As of the date of this report, the Deferred Amount remains outstanding. Former Management Payments.
Added
We engaged ThinkEquity LLC as our exclusive advisor in connection with the solicitation of these warrants for which we paid cash compensation of 3% of the gross proceeds, or approximately $0.2 million. After deducting such commissions, the net proceeds we received from these warrant exercises was approximately $7.7 million.
Removed
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.
Added
We believe the following accounting estimates are critical to understanding our consolidated financial statements because they involve significant judgment, estimates and assumptions. Revenue Recognition We generate revenue primarily through our UAS solutions and services business, which includes the sale and distribution of UAS platforms, payloads, sensors, batteries, accessories and related equipment, as well as certain support services.
Removed
The “Former Management Payments” comprise (i) an aggregate amount of $803,260.65 (the “Bonus Plan Payment”) that, as of the Effective Date, remains payable to the recipients of bonuses payable pursuant to that certain Strategic Transaction Bonus Plan, adopted on July 24, 2023 and as amended (the “Bonus Plan”) together with (ii) an aggregate amount of $303,372.87 (the “Loundermon Advisory Fee”) that, as of the Effective Date, is payable to Wendy Loundermon, the Company’s former Chief Financial Officer and a former director of the Company (“Loundermon”), pursuant to that certain Consulting Agreement, dated March 12, 2024, by and between the Company and Loundermon (the “Loundermon Consulting Agreement”). 41 On March 31, 2025, the Company paid all amounts due under the Former Management Payments in full.
Added
Substantially all revenue is recognized at a point in time when control transfers to the customer, which generally occurs upon shipment for wholesale and direct sales transactions (FOB shipping point) or at the point of sale for retail transactions.
Removed
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 and each of its former and current subsidiaries, divisions, affiliates, predecessors, successors, assigns, and its and their respective employees, officers, directors, shareholders, members, partners, trustees, joint venturers, attorneys, agents, and representatives (collectively, the “XTI Parties”), from and with respect to any and all claims, demands, causes of action, damages, obligations, liabilities, costs, and expenses of any kind or nature whatsoever (collectively, “Ali Claims”), arising out of any obligations of the Company with respect to the Ali Consulting Agreement, the Series 9 Purchase Agreement and the portion of the Bonus Plan relating to Ali, whether known or unknown, foreseen or unforeseen, that the Ali Parties, or any of them, ever had, now have, or may have against the XTI Parties, or any of them, from the beginning of time through and including the Completion Date (as defined below).
Added
Certain service-based offerings, including product protection programs, may be recognized over time; however, such amounts are not material to the consolidated financial statements. We generally act as principal in our sales arrangements and recognize revenue on a gross basis.
Removed
As used in the Settlement Agreement, the term “Completion Date” means the date on which the Company has delivered (i) the Series 9 Redemption Amount to Ali by wire transfer of immediately available funds; (ii) the Deferred Amount to Ali by wire transfer of immediately available funds; (iii) the Outstanding Amount to Ali by wire transfer of immediately available funds; (iv) the Former Management Payments to Loundermon and the recipients of the Bonus Plan Payments by wire transfer of immediately available funds.
Added
In limited cases, we facilitate the sale of third-party service offerings (e.g., product protection programs), for which we act as an agent and recognize revenue on a net basis; however, such amounts are not material. The transaction price may include variable consideration, including volume discounts, rebates, and estimated product returns, which are recorded based on historical experience and current trends.
Removed
As of the Effective Date, the XTI Parties agreed to release the Ali Parties from and with respect to any and all claims, demands, causes of action, damages, obligations, liabilities, costs, and expenses of any kind or nature whatsoever (collectively, “XTI Claims”), arising out of any obligations of the Ali Parties with respect to any obligation of the Ali Parties in connection with 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, whether known or unknown, foreseen or unforeseen, that the XTI Parties, or any of them, ever had, now have, or may have against the Ali Parties, or any of them, from the beginning of time through and including the Completion Date.
Added
Deferred revenue primarily represents amounts received from customers prior to shipment. 54 We record freight billed to customers in revenue, and related shipping and handling costs are included in cost of revenues.
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