Financial Performance - Revenues for Q1 2025 were $0.5 million, a 120% increase from $0.2 million in Q1 2024, driven by the Industrial IoT segment [248]. - Gross profit for Q1 2025 was $0.3 million, up 137.6% from $0.1 million in Q1 2024, with a gross margin of 69.2% compared to 64.1% in the prior year [251]. - Operating expenses increased to $10.7 million in Q1 2025 from $9.0 million in Q1 2024, with a significant portion attributed to R&D and consulting expenses [252]. - Net loss for Q1 2025 was $12.9 million, a 394.7% increase from a net loss of $2.6 million in Q1 2024 [248]. - Cash and cash equivalents as of March 31, 2025, were approximately $8 million, an increase of $3.9 million from $4.1 million at the end of 2024 [258]. - Net working capital improved to $12,000 as of March 31, 2025, compared to a deficit of $8.8 million at the end of 2024 [259]. - The company raised approximately $23.3 million in net proceeds during Q1 2025, which helped reduce debt and support the development of the TriFan 600 airplane [260]. - Customer deposits as of March 31, 2025, totaled approximately $1.4 million from non-binding aircraft purchase agreements and reservation deposits [264]. - The company raised approximately $21.7 million in net proceeds from public offerings during the first quarter of 2025, which was partially used to repay short-term obligations [268]. - The company's cash and cash equivalents increased to approximately $8 million as of March 31, 2025, up from $4.1 million as of December 31, 2024 [271]. - Net cash used in operating activities increased significantly from approximately $2.6 million in Q1 2024 to approximately $15.2 million in Q1 2025 [273][272]. - Net cash flows provided by financing activities were approximately $19.2 million for the three months ended March 31, 2025, compared to $1.4 million in the same period of 2024 [276][277]. - The company experienced a decrease in accrued expenses and other current liabilities of approximately $4.9 million, primarily due to cash payments for transaction bonuses and employee bonuses [272]. - The company reported a working capital of approximately $12,000 as of March 31, 2025, compared to a deficit of $8.84 million as of December 31, 2024 [271]. - Cash flows used in investing activities were approximately $45,000 for the three months ended March 31, 2025, compared to a net cash inflow of approximately $3 million in the same period of 2024 [274]. - The company became ineligible to use Form S-3 until August 2025, which may impair its ability to raise necessary capital [270]. Business Development - The company has not generated any revenue from aircraft sales as it is still in the design and development phase of the TriFan 600 airplane [208]. - The FAA accepted the company's type certification application for the TriFan 600 on March 17, 2025 [222]. - The company increased the wing fuel volume of the TriFan 600 from approximately 300 gallons to 400 gallons, enhancing its maximum range and mission length [221]. - The company is exploring strategic options to wind down and/or sell the hardware portions of its Industrial IoT business segment to focus on software products [210]. - The fair value of the Industrial IoT reporting unit exceeded its carrying value by 2.2% as of March 31, 2025, resulting in no goodwill impairment recognized for the quarter [232]. - The company is expanding into autonomous, remotely operated drones as part of its strategic focus to create new revenue-generating opportunities [214]. - The company is developing ancillary service offerings related to the TriFan 600, such as flight training and maintenance products [211]. - Research and development expenses are expected to increase significantly as the company expands staffing for aircraft engineering and software development [236]. - The company has authorized a share repurchase program to acquire up to $5 million of its common stock [218]. - The company has a commitment to pay $1.5 million in deferred consulting fees to Nadir Ali in three installments through 2025 [265]. - As of March 31, 2025, the company reported a net loss of approximately $12.9 million and used approximately $15.2 million in cash for operating activities [266][272].

Merger and Acquisition - The company completed a merger with Legacy XTI on March 12, 2024, resulting in a name change to XTI Aerospace, Inc.[18] - The merger is accounted for as a reverse acquisition, with Legacy XTI as the accounting acquirer, affecting the consolidated financial statements from the closing date through December 31, 2024[19] - XTI Aerospace completed a merger with Legacy XTI on March 12, 2024, with Legacy XTI as the accounting acquirer[18] - The merger is accounted for as a reverse acquisition, with the financial statements reflecting a continuation of Legacy XTI's results[19] Stock Split - A reverse stock split at a ratio of 1-for-100 was executed on March 12, 2024, to comply with Nasdaq Listing Rule 5550(a)(2)[21] - A subsequent reverse stock split of 1-for-250 is planned for January 10, 2025, also for compliance with Nasdaq Listing Rule 5550(a)(2)[21] Financial Performance and Challenges - The company has a history of losses and faces challenges in achieving profitability and delivering non-prototype aircraft to customers[13] - Future financial results are subject to uncertainties, and actual outcomes may differ from projections due to various risks[15] - Economic conditions, including inflation and supply chain challenges, may impact the company's performance and customer base[16] Development and Commercialization - The development and commercialization schedule for the TriFan 600 is critical, with necessary certifications still pending[13] - Conditional pre-orders for aircraft may be subject to cancellation or modification, impacting future cash flows[13] Competitive Landscape and Risks - The company is navigating a competitive landscape with emerging technologies that may outpace its developments[13] - The company faces risks related to long development cycles, quality control, and dependence on third-party suppliers[16] - The company is subject to potential lawsuits and regulatory investigations, including those from the SEC[16] - Future patent applications may face delays or rejections, incurring substantial costs for the company[16] - The company must manage risks associated with system failures and changes in tax regimes[16] Operational Focus - The company is focused on enhancing its brand reputation and expanding its customer base while managing manufacturing and supply chain relationships[16] - The ability to attract and retain qualified personnel is critical for the company's growth and operational success[16]

Financial Performance and Liabilities - Total balance sheet liabilities as of December 31, 2024 were reduced compared to September 30, 2024[7] - The company's financial statements for the quarter ended December 31, 2024 are unaudited and subject to change, with final results potentially differing materially from preliminary information[8] Capital Raising and Stock Information - The company raised approximately $25,000,000 in gross proceeds from the sale of common stock under its "at-the-market" offering program since the end of the quarter ended March 31, 2024[7] - The company's common stock is traded under the symbol XTIA on the Nasdaq Capital Market[3] Business and Financial Updates - The press release dated January 23, 2025, provides updates on recent business and financial highlights[5]

Core Insights - XTI Aerospace's business unit Inpixon has won the "RTLS Solution of the Year 2025" award at the IoT Breakthrough Awards, competing against over 40 entrants [1][2] - Inpixon's RTLS solutions enhance operational efficiency, safety, and decision-making across various industries [1][3] Company Overview - XTI Aerospace, Inc. is developing the TriFan 600, a fixed-wing business aircraft with VTOL capabilities, speeds of 345 mph, and a range of 700 miles [5] - Inpixon specializes in real-time location systems (RTLS) technology, providing solutions that optimize operations and enhance safety in sectors like manufacturing, logistics, and government [5][3] Industry Recognition - The IoT Breakthrough Awards recognize top companies and technologies in the global IoT market, highlighting Inpixon's leadership in RTLS technology [2] - The award reflects Inpixon's commitment to innovation and its role in advancing Industry 4.0 through AI-powered location-aware solutions [3]

Merger and Acquisition - The company completed its merger with Legacy XTI on March 12, 2024, structured as a reverse triangular merger[235]. - The XTI Merger was completed on March 12, 2024, with Legacy Inpixon as the legal acquirer and Legacy XTI as the accounting acquirer under GAAP[318]. - Legacy XTI's historical financial statements are considered the financial statements of the combined company[318]. - The integration of Legacy XTI into the company's system of disclosure controls and procedures is currently being evaluated by a third-party consulting firm[319]. Aircraft Development - The company is primarily focused on developing the TriFan 600, a VTOL aircraft, which is expected to offer speed, range, and comfort comparable to business aircraft while providing helicopter versatility[217]. - The company reported that the Commercial Aviation segment is currently pre-revenue as it is still in the development phase of the TriFan 600 aircraft[219]. - The company plans to seek FAA certification for the TriFan 600, with significant milestones including the critical design review and preliminary testing of a full-scale flight test aircraft[227][230]. - The company is pursuing additional capital to complete the development of the TriFan 600 and is exploring multiple funding alternatives[223]. Financial Performance - Revenue for the three months ended September 30, 2024, was $0.9 million, an increase of approximately $0.9 million compared to $0.0 million in the same period last year[271]. - Cost of revenues for the three months ended September 30, 2024, was $0.4 million, compared to $0.0 million for the same period in the prior year[272]. - Gross profit for the three months ended September 30, 2024, was $0.5 million, compared to $0.0 million in the prior year, with a decline of approximately $0.2 million from the previous quarter due to a one-time inventory impairment charge[273]. - Operating expenses for the three months ended September 30, 2024, were $4.7 million, an increase from $2.4 million in the same period last year, primarily due to increased expenditures related to the TriFan 600 aircraft development[274]. - Net loss for the three months ended September 30, 2024, was $4.4 million, compared to a net loss of $2.7 million in the prior year, reflecting an increase of 64%[268]. - Revenues for the nine months ended September 30, 2024, were $2.2 million, a significant increase from $0.0 million in the same period of 2023, attributed to the Industrial IoT segment post-XTI Merger[280]. - Cost of revenues for the same period was $0.8 million, compared to $0.0 million in the prior year, reflecting the operational results of the Industrial IoT segment[281]. - Gross profit for the nine months ended September 30, 2024, was $1.3 million, up from $0.0 million in the comparable period of 2023[282]. - Operating expenses increased to $28.3 million from $7.7 million year-over-year, primarily due to nonrecurring transaction bonuses and merger-related costs[283]. - Net loss for the nine months ended September 30, 2024, was approximately $21.7 million, compared to a net loss of $8.9 million in the same period of 2023, representing a 144% increase in losses[299]. - Other income for the nine months ended September 30, 2024, was a gain of $5.3 million, a turnaround from a loss of $1.2 million in the prior year, largely due to the remeasurement of convertible notes[285]. Cash Flow and Working Capital - As of September 30, 2024, the company had a working capital deficit of approximately $11.9 million and cash and cash equivalents of approximately $0.5 million[288]. - The company used approximately $14.3 million in cash for operating activities during the nine months ended September 30, 2024[299]. - The Company sold 3,190,727 shares of common stock under the ATM Offering, generating net proceeds of approximately $1.0 million during the three months ended September 30, 2024[301]. - The Company reported a net cash used in operating activities of approximately $14.3 million for the nine months ended September 30, 2024, compared to $3.0 million for the same period in 2023[304][310]. - Net cash provided by investing activities was approximately $2.9 million for the nine months ended September 30, 2024, compared to $0.0 million for the same period in 2023[313]. - Net cash provided by financing activities was $11.9 million for the nine months ended September 30, 2024, with $9.6 million from the ATM Offering and $2.0 million from promissory notes[314]. - The Company has a working capital deficit of $11.9 million as of September 30, 2024, compared to $13.0 million as of December 31, 2023[304]. Compliance and Governance - The company received a letter from Nasdaq on July 9, 2024, indicating it no longer meets the minimum bid price requirement of $1 per share, with a compliance period until January 6, 2025[236]. - The company is in the process of preparing a plan to regain compliance with Nasdaq listing rules following a Low Price Deficiency Letter received on November 7, 2024[237]. - The company is currently seeking additional financing to meet cash requirements, with potential actions including curtailing operations or seeking bankruptcy protection if unable to secure funding[303]. - The integration of Legacy XTI into the Company's disclosure controls and procedures is ongoing and being evaluated by a third-party consulting firm[318]. - As of September 30, 2024, the company concluded that its disclosure controls and procedures were not effective[318]. - There have been no material changes in internal control over financial reporting during the quarter ended September 30, 2024[320]. - The company has no material pending legal proceedings as defined by Item 103 of Regulation S-K[322]. Research and Development - Research and development expenses are expected to increase significantly as the company increases staffing to support aircraft engineering and software development[259]. - General and administrative expenses are anticipated to increase substantially in the future as the company expands its headcount to support continued research and development[263]. Industrial IoT Segment - The Industrial IoT segment has focused on building the Indoor Intelligence platform since 2019, positioning the company as a market leader in providing comprehensive solutions for data collection and insights[226]. - The company believes its RTLS products offer superior accuracy compared to competitors, which primarily rely on BLE or Wi-Fi technologies[234].

Financial Performance - Revenue for the three months ended June 30, 2024, was $1.0 million, an increase of approximately $1.0 million compared to $0.0 million in the same period of 2023[236]. - Operating expenses for the three months ended June 30, 2024, were $14.6 million, an increase of approximately $10.5 million from $4.0 million in the same period of 2023, primarily due to nonrecurring transaction bonus expenses and increased legal and accounting fees[239]. - Net loss for the three months ended June 30, 2024, was $14.7 million, compared to a net loss of $4.6 million in the same period of 2023, representing an increase of $10.1 million[234]. - Revenue for the six months ended June 30, 2024, was $1.3 million, compared to $0.0 million for the same period in 2023, reflecting the results of the Industrial IoT segment post-merger[245]. - Operating expenses for the six months ended June 30, 2024, were $23.6 million, an increase of approximately $18.3 million from $5.3 million in the same period of 2023[243]. - Gross profit for the three months ended June 30, 2024, was $0.7 million, compared to $0.0 million in the same period of 2023[238]. - Gross profit for the six months ended June 30, 2024, was $0.8 million, compared to $0.0 million for the same period in 2023[247]. - Other income for the six months ended June 30, 2024, was a gain of $5.5 million, compared to a loss of $0.9 million for the same period in 2023, reflecting a fluctuation of approximately $6.4 million[250]. - For the six months ended June 30, 2024, the company incurred a net loss of approximately $17.3 million and used approximately $8.2 million in cash for operating activities[273]. Cash Flow and Working Capital - As of June 30, 2024, the company had a working capital deficit of approximately $7.9 million and cash and cash equivalents of approximately $5.8 million[252]. - Net cash used by operating activities of $8.2 million for the six months ended June 30, 2024[252]. - Net cash used in operating activities for the six months ended June 30, 2024 was approximately $8.2 million, compared to $1.6 million for the same period in 2023[276][279]. - Net cash flows provided by investing activities during the six months ended June 30, 2024 were approximately $2.9 million, compared to $0.0 million in 2023[281]. - Net cash flows provided by financing activities during the six months ended June 30, 2024 were $11.1 million, significantly higher than $1.5 million in 2023[282]. Transaction Bonuses and Liabilities - The company accrued 100% of the transaction bonuses, recognizing approximately $6.7 million of transaction bonus expense for the three and six months ended June 30, 2024[180]. - As of June 30, 2024, approximately $6.7 million of accrued transaction bonuses remained outstanding, included in Accrued Expenses and Other Current Liabilities[180]. - As of June 30, 2024, the company has accrued 100% of the transaction bonuses, totaling $6.7 million, with $0.9 million paid during Q3 2024[269]. - As of June 30, 2024, the company has liabilities of approximately $0.5 million and $0.1 million related to deferred compensation and retention bonuses[272]. Legal Matters - The company is involved in litigation with Xeriant, which claims damages in excess of $500 million due to alleged breaches and fraudulent actions by Legacy XTI[184]. - There are no material pending legal proceedings involving the company, other than ordinary routine litigation[288]. - No adverse legal interests involving directors, officers, or significant shareholders were reported[288]. Mergers and Acquisitions - The XTI Merger was completed on March 12, 2024, with Legacy Inpixon as the legal acquirer and Legacy XTI as the accounting acquirer under GAAP[285]. - The historical financial statements of Legacy XTI will be considered the financial statements of the combined entity[285]. - The Transaction Value for the XTI Merger was assessed at $225 million, based on the enterprise value of Legacy XTI[260]. - The company issued 385,359 registered shares of XTI Aerospace common stock as part of the financial advisory fees in connection with the XTI Merger[255]. Development and Engineering - The company is developing the TriFan 600, a vertical takeoff and landing aircraft, and is currently in the pre-revenue stage for the Commercial Aviation segment[193][196]. - The company is focused on securing FAA certification for the TriFan 600, which is critical for generating revenues in the commercial aviation segment[200]. - The company completed its preliminary design review (PDR) for the TriFan 600 in 2022, setting the stage for further design development[203]. - The company has established a core engineering organization and retained consulting firms to enhance its engineering capabilities for the TriFan 600[202]. - The company aims to enhance its sales and marketing capabilities to increase awareness and customer orders for the TriFan 600[199]. - The company is pursuing multiple funding alternatives to complete the development of the series of Test Aircraft[199]. - Research and development expenses are expected to increase significantly as the company expands staffing to support aircraft engineering and software development[229]. Market Position and Products - The company’s Industrial IoT business is positioned as a market leader with a comprehensive suite of products aimed at enhancing workplace environments[201]. - The company’s RTLS Indoor Intelligence products compete with major players like Aruba and Cisco, but it believes its offerings are more comprehensive and accurate[208]. - The company is committed to ongoing research and development to maintain a competitive position in the rapidly changing technology landscape[206]. - The TriFan 600 is expected to offer lower direct operating costs and the ability to fly almost twice as many missions compared to competing helicopters[207]. Internal Controls and Governance - As of June 30, 2024, the company's disclosure controls and procedures were deemed ineffective by the Chief Executive Officer and Chief Financial Officer[285]. - The company began integrating Legacy XTI into its disclosure controls and procedures during the second quarter of 2024[285]. - A third-party consulting firm is being engaged to assist in evaluating and remediating internal controls over financial reporting for the combined entity[285]. - No changes in internal control over financial reporting were identified during the quarter ended June 30, 2024, that materially affected internal controls[286]. - Anticipated changes to the internal control environment are expected in the third quarter of 2024 due to integration efforts[286]. - The company acknowledges that no control system can provide absolute assurance that all control issues have been detected[286]. Future Outlook - The company expects revenues for the third and fourth quarters of 2024 to remain consistent with the second quarter of 2024[236]. - The company’s financial statements are prepared under the assumption of continuing as a going concern for the next twelve months, dependent on obtaining additional financing and improving operational efficiency[274].

Commercial Aviation Development - The company has not generated revenue from the Commercial Aviation segment as it is still in the design, development, and certification phase for the TriFan 600 aircraft [277]. - The company completed its preliminary design review (PDR) for the TriFan 600 in 2022, which set the stage for further design development [266]. - The current development design review (DDR) phase includes interactions with suppliers to mature major structures and systems of the TriFan 600, with ongoing communication with the FAA to ensure compliance [267]. - The company plans to seek FAA certification for the TriFan 600, with critical design review (CDR) and preliminary testing of a full-scale flight test aircraft as the next milestones [265]. - The company is pursuing multiple funding alternatives to complete the development of the TriFan 600 and its test aircraft [261]. Industrial IoT Segment - The Industrial IoT segment generates revenue through a "location as a service" (LaaS) model, which typically involves 3-5 year contracts and includes maintenance and hardware upgrades, creating a recurring revenue stream [278]. - The company believes it has positioned its Industrial IoT business as a market leader with a comprehensive suite of products and solutions [264]. - The company faces significant competition in both the Commercial Aviation and Industrial IoT markets, with larger competitors having better financial resources [270][271]. Financial Performance - Revenues for the three months ended March 31, 2024 were $0.2 million, a significant increase from $0.0 million in the same period of 2023, marking a change of approximately $0.2 million [291]. - Operating expenses for the same period increased to $9.0 million from $1.3 million, representing a substantial increase of approximately $7.7 million or 602% [294]. - Net loss for the three months ended March 31, 2024 was $2.6 million, compared to a net loss of $1.6 million in the prior year, reflecting an increase of 66% [289]. - Other income for the three months ended March 31, 2024 was a gain of $6.3 million, compared to a loss of $0.3 million in the same period last year, an increase of approximately $6.6 million [295]. - The company reported a working capital deficit of approximately $5.1 million as of March 31, 2024 [299]. - Cash and cash equivalents as of March 31, 2024 were approximately $1.8 million [299]. - Customer deposits received as of March 31, 2024 amounted to approximately $1.4 million, which will not be recognized as revenue until aircraft orders are delivered [301]. - The company incurred inducement losses on debt conversions of approximately $6.7 million during the three months ended March 31, 2024 [295]. - The increase in operating expenses was primarily due to a rise in non-cash stock-based compensation expense of approximately $5.7 million [294]. - The company recognized an income gain of approximately $12.9 million related to the remeasurement of convertible notes at fair value during the three months ended March 31, 2024 [295]. - For the three months ended March 31, 2024, the company had a net loss of approximately $2.6 million and used approximately $2.6 million of cash for operating activities [327]. - Net cash used in operating activities during the three months ended March 31, 2024 was approximately $2.6 million, with non-cash expenses totaling approximately $0.7 million [332]. - The company assessed the Transaction Value applicable to the XTI Merger at $225 million, based on the enterprise value of Legacy XTI [312]. Merger and Compensation - The company completed its merger with XTI Aircraft Company on March 12, 2024, which was structured as a reverse triangular merger [272]. - The company plans to pay Mr. Ali a total of $1.5 million three months following the closing of the XTI Merger, plus $4.5 million in 12 equal monthly installments of $375,000 each [319]. - As of March 31, 2024, liability amounts of approximately $0.7 million and $0.1 million are included in Accrued Expenses and Other Current Liabilities and Related Party Payables, respectively, related to deferred compensation and retention bonuses [325]. - The company restored the salaries of all employees to the original amount effective March 31, 2023, following additional financing received in the first quarter of 2023 [326]. - The company has implemented a cost savings plan effective July 1, 2022, which includes a compensation reduction directive and retention bonus program [323]. Cash Flow and Going Concern - The company’s condensed consolidated financial statements for the three months ended March 31, 2024, have been prepared under the assumption of continuing as a going concern for the next twelve months [329]. - Net cash used in operating activities for the three months ended March 31, 2023 was approximately $0.5 million, with a net loss of $1.565 million [333]. - Non-cash expenses totaled approximately $0.315 million, primarily due to stock-based compensation expense of $0.141 million [333]. - Net cash flows used in investing activities for the three months ended March 31, 2024 was approximately $3.0 million, compared to $0.0 million in the same period of 2023 [334]. - Net cash flows provided by financing activities for the three months ended March 31, 2024 was $1.4 million, including $1.0 million from an existing promissory note arrangement [335]. - In the three months ended March 31, 2023, net cash flows provided by financing activities was $0.7 million, with $0.3 million from the issuance of a convertible note [336]. - The net change in operating assets and liabilities for the three months ended March 31, 2023 resulted in a cash use of approximately $0.793 million, primarily due to an increase in accounts payable of $0.496 million [333]. - The company does not have any off-balance sheet guarantees or trading activities involving non-exchange traded contracts [337]. - There were no applicable quantitative and qualitative disclosures about market risk [339].

Corporate Actions and Mergers - The company completed a reverse stock split at a ratio of 1-for-100 effective March 12, 2024, to comply with Nasdaq Listing Rule 5550(a)(2) and satisfy bid price requirements for the XTI Merger[136]. - The merger between XTI Aerospace and XTI Aircraft Company was completed on March 12, 2024, with Legacy XTI becoming a wholly-owned subsidiary of XTI Aerospace[219]. - The merger transaction was executed under the XTI Merger Agreement, originally dated July 24, 2023, and amended on December 30, 2023, and March 12, 2024[219]. - The company reported its audited consolidated financial statements for the years ended December 31, 2023, and 2022, which were filed with the SEC on March 15, 2024[221]. Product Development and Technology - The TriFan 600 is expected to have a range of 700 miles, providing significant advantages over eVTOL aircraft, which rely on charging infrastructure not yet commercially available[139]. - The company has established a baseline bill-of-materials for the TriFan 600 by negotiating with key suppliers globally during the design phase[145]. - The company is pursuing a phased approach to hybrid-electric propulsion for future TriFan configurations, considering current technology readiness and regulatory guidance[139]. - The company emphasizes the importance of securing required certifications for the TriFan 600 aircraft to ensure successful development and commercialization[217]. - The company is committed to developing new products and technologies to meet customer demand and enhance its competitive position[217]. Market and Customer Dynamics - The company aims to diversify its product offerings and increase market presence through acquisitions, although future consumer demand remains uncertain[157]. - The company's RTLS business growth depends on increasing sales to existing customers and acquiring new customers, which is influenced by competitive pricing and product quality[152]. - Two customers accounted for over 27% of revenue in 2023, with one customer contributing 17% and another 10%[176]. - In 2022, one customer represented 23% of revenue, indicating a potential volatility in customer contributions to revenue[176]. - The market acceptance of RTLS products is critical, with potential impacts from technological changes and competition affecting growth prospects[181]. Financial Risks and Challenges - The company faces risks related to the timely collection of receivables, which could adversely affect cash flow and working capital[179]. - The company may be subject to product liability claims due to manufacturing or design defects, which could have a material adverse effect on its financial condition[170]. - The company is subject to risks from reliance on a limited number of significant customers, which could materially affect operations if lost[178]. - The company has a history of losses and is focused on achieving profitability in the future[207]. - The company has outlined potential risks associated with its ability to maintain profitability and manage operational challenges[215]. Operational and Geopolitical Risks - The company faces risks from potential changes in U.S.-China trade relations, which could impact its ability to source hardware products necessary for manufacturing[149]. - The company is vulnerable to cyber threats that could disrupt operations and harm its reputation, despite implementing security measures[162]. - The company is exposed to risks associated with foreign operations, including currency fluctuations and longer payment cycles[213]. - The company faces risks related to geopolitical and economic factors that could impact international sales and operations[209]. - XTI Aerospace's international business is sensitive to changes in customer priorities and budgets, influenced by geopolitical uncertainties[211]. Supply Chain and Operational Efficiency - The company is navigating challenges related to supply chain disruptions and increased costs for materials and labor[208]. - The company may experience delays or cancellations in installations if its products do not effectively interoperate with customers' IT infrastructure[197]. - Defects or vulnerabilities in products could lead to significant financial expenditures to address issues, impacting overall operational results[184]. - The company is focused on integrating acquired technologies and companies to achieve operational synergies[218].

Financial Performance - Inpixon reported a net loss from continuing operations of approximately $30.5 million for the nine months ended September 30, 2023, compared to a net loss of approximately $27.1 million for the same period in 2022[290]. - Revenues for the three months ended September 30, 2023, were $2.0 million, a decrease of approximately $0.4 million or 17% compared to $2.4 million in the same period last year[356]. - Revenues for the nine months ended September 30, 2023, were $7.2 million, a decrease of approximately $0.5 million or 6% compared to $7.7 million in the same period of 2022, primarily due to longer sales cycles in the IIOT business[365]. - Net loss attributable to stockholders for the nine months ended September 30, 2023, was $34.2 million, a decrease of $14.5 million or 30% from a loss of $48.7 million in the prior year[364]. - For the three months ended September 30, 2023, the net loss attributable to stockholders was $10,384,000, compared to a net loss of $22,631,000 for the same period in 2022[384]. - The proforma non-GAAP net loss for the nine months ended September 30, 2023, was $21,368,000, which is an increase from a loss of $9,964,000 in the same period of 2022[384]. Revenue and Cost Analysis - Cost of revenues for the three months ended September 30, 2023, were $0.5 million, a decrease of approximately $0.3 million or 40% compared to $0.8 million in the prior year[357]. - Cost of revenues for the nine months ended September 30, 2023, was $1.6 million, a decrease of approximately $0.8 million or 32% from $2.4 million in the prior year, mainly due to lower costs in the SAVES product line[366]. - Gross profit for the three months ended September 30, 2023, was $1.6 million, representing 78% of revenues, compared to $1.7 million or 69% of revenues in the prior year[355]. - Gross profit margin for the three months ended September 30, 2023, was 78%, up from 69% in the same period of 2022, primarily due to lower costs in the SAVES and indoor intelligence product lines[358]. - Gross profit margin for the nine months ended September 30, 2023, was 77%, up from 69% in the same period of 2022, driven by lower costs in the SAVES product line[367]. Strategic Transactions and Corporate Actions - Inpixon is exploring strategic transactions, including possible asset sales, mergers, or spin-offs, to enhance shareholder value[293]. - Inpixon entered into a merger agreement with XTI Aircraft Company on July 24, 2023, and plans to divest its Shoom, SAVES, and Game Your Game lines of business[294]. - The Company entered into a Merger Agreement with XTI Aircraft Company on July 24, 2023, with the anticipated exchange ratio allowing Inpixon stockholders to retain approximately 40% of the combined company[319]. - Inpixon plans to spin off Grafiti Holding Inc. by distributing all outstanding common shares of Grafiti to stockholders on a pro rata basis[345]. - Inpixon entered into a Business Combination Agreement with Damon Motors Inc. and anticipates that holders of Grafiti Common Shares will retain approximately 18.75% of the outstanding capital stock of the combined company[348]. Cash Flow and Liquidity - As of September 30, 2023, the company had cash and cash equivalents of $13,489,000, an increase from $10,235,000 as of December 31, 2022[396]. - The company reported a working capital surplus of approximately $2,986,000 as of September 30, 2023, down from $5,152,000 at the end of 2022[396]. - Net cash used in operating activities for the nine months ended September 30, 2023, was $25,090,000, compared to $26,943,000 for the same period in 2022[394]. - The company raised gross proceeds of approximately $27,400,000 in connection with the ATM Offering and received $2,300,000 from warrants exercised since January 1, 2023[392]. - The company expects that general economic conditions may materially impact its liquidity and ability to access capital for growth plans[393]. Expenses and Impairments - Operating expenses for the three months ended September 30, 2023, were $10.6 million, an increase of approximately $3.5 million or 49% compared to $7.1 million in the prior year[355]. - The Company paid approximately $3.5 million to management under the Transaction Bonus Plan during the three months ended September 30, 2023[333]. - Non-cash income and expenses totaled approximately $22.2 million, primarily due to stock-based compensation and impairment of goodwill[399]. - As of September 30, 2023, the Company's previously recorded goodwill has been fully impaired[354]. Compliance and Regulatory Matters - The company received a notice from Nasdaq regarding non-compliance with the minimum bid price requirement, with a deadline to regain compliance by April 8, 2024[302]. - A reverse stock split was approved by shareholders to potentially cure bid price deficiencies, with a ratio between 1-for-2 and 1-for-50 to be determined by the board[304]. Market and Economic Conditions - The company anticipates challenges from global events, including supply chain interruptions and increased costs, which may impact its operations[292]. - There were no significant market risks disclosed in the report[405].

Financial Performance - Inpixon reported a net loss from continuing operations of approximately $19.7 million for both the six months ended June 30, 2023, and 2022 [265]. - Revenues for Q2 2023 were $2.1 million, a decrease of approximately 20% from $2.6 million in Q2 2022, primarily due to delayed shipments and lower sales in the Indoor Intelligence and SAVES product lines [318]. - For the six months ended June 30, 2023, revenues were $5.161 million, a slight decrease of approximately 1% from $5.225 million in the same period in 2022 [329]. - Net loss from continuing operations for Q2 2023 was $7.3 million, an improvement of 18% compared to a loss of $9.0 million in Q2 2022 [318]. - The company recorded a net loss attributable to stockholders of $6.966 million in Q2 2023, a significant improvement of 65% from a loss of $19.872 million in Q2 2022 [318]. - For the six months ended June 30, 2023, the net loss attributable to common stockholders was $23.840 million, compared to a loss of $42.219 million in the same period of 2022 [341]. - The company reported a net loss of $24.5 million for the six months ended June 30, 2023, an improvement from a net loss of $31.9 million in the same period of 2022 [359][360]. - Adjusted EBITDA for Q2 2023 was a loss of $5.0 million, compared to a loss of $5.2 million in Q2 2022 [338]. - Adjusted EBITDA for the six months ended June 30, 2023, was $(9.870) million, compared to $(11.667) million in the prior year [341]. Cash Flow and Liquidity - As of June 30, 2023, the company had cash and cash equivalents of approximately $15.681 million [351]. - The company reported net cash used by operating activities for the six months ended June 30, 2023, of $15.8 million [352]. - Net cash used in operating activities for the six months ended June 30, 2023 was approximately $15.8 million, compared to $19.5 million for the same period in 2022 [355][360]. - Net cash provided by financing activities for the six months ended June 30, 2023 was $11.7 million, compared to a net cash outflow of $4.2 million in the same period of 2022 [363]. - Cash and cash equivalents as of June 30, 2023 were $15.7 million, an increase from $10.2 million as of December 31, 2022 [357]. - The company experienced a net decrease in cash and cash equivalents of $4.6 million for the six months ended June 30, 2023, compared to an increase of $13.3 million in the same period of 2022 [357]. - The company anticipates that current cash balances and financing facilities will be sufficient to meet working capital needs for the next 12 months [355]. Strategic Transactions and Mergers - The company has entered into an agreement to merge with XTI Aircraft Company, with plans to divest its Shoom, SAVES, and Game Your Game lines of business [268]. - The merger agreement with XTI Aircraft Company was unanimously approved, with Inpixon expected to retain approximately 40% and XTI security holders approximately 60% of the combined company's capital stock [287]. - Inpixon will provide loans to XTI of up to $1,775,000, with each Future Loan being in the principal amount of up to $500,000 [291]. - The total principal amount under the Promissory Note is up to $2,313,407, which includes $525,000 previously advanced to XTI [292]. - The merger agreement includes provisions for the conversion of XTI's outstanding convertible notes into common stock of the combined company [282]. - The company is exploring strategic transactions, including possible asset sales, mergers, or spin-offs to enhance shareholder value [268]. Stock and Shareholder Information - The company sold 28,981,729 shares of common stock for gross proceeds of approximately $21.0 million during the six months ended June 30, 2023 [269]. - The company issued 9,000,000 shares of common stock in July 2023, receiving gross proceeds of approximately $2.3 million from the exercise of warrants [280]. - The company is currently subject to Nasdaq's "baby shelf rules," which may limit future issuances of shares due to its public float being less than $75 million [269]. - The company has been provided a 180-day period to regain compliance with Nasdaq's minimum bid price requirement of $1 per share [274]. - A cash fee of $800,000 will be paid to Maxim Group LLC upon closing of the merger, along with approximately 6,565,988 shares of Inpixon common stock [289]. - The Completed Transaction Bonus Plan allows eligible participants to receive a cash bonus equal to 100% of their aggregate annual base salary as of December 31, 2022 [298]. - Inpixon's named executive officers will receive a cash bonus totaling 4% of the $70,350,000 transaction value from the Completed Transaction [299]. - The Transaction Bonus Plan for future strategic transactions will provide bonuses to participants upon the closing of a Contemplated Transaction or Qualifying Transaction [304]. Operational Challenges - Supply chain interruptions and increased costs for parts, materials, and labor are expected to continue to challenge the business [356]. - The company may pursue strategic transactions and raise additional capital as needed through equity securities and/or cash and debt financings [356].