XTI Aerospace, Inc.(XTIA) - 2025 Q3 - Quarterly Report

Aircraft Development - The company is developing the TriFan 600, a VTOL airplane designed for over 1,000 miles of travel, aiming to achieve speeds twice that of competing helicopters and cruise at altitudes up to 25,000 feet [228]. - The company plans to secure FAA certification for the TriFan 600, which is critical for future revenue generation and operational success [235]. - The TriFan 600 program achieved initial flight operations for subscale prototypes, validating key design elements, with a full-scale demonstrator expected to be completed in 2027 [258]. - The company expects to commence deliveries of the TriFan 600 no earlier than 2030 and plans to fund operations primarily through equity and/or debt financings until then [313]. Financial Performance - Revenues for Q3 2025 were $2.5 million, a 171% increase from $0.9 million in Q3 2024, primarily driven by a $1.3 million increase in hardware revenue due to improved supply chain conditions [284]. - Gross profit for Q3 2025 was $1.1 million, up 107% from $0.5 million in Q3 2024, with a gross margin of 43.4%, down from 56.6% in the prior year due to a shift towards lower margin hardware products [287]. - Operating expenses for Q3 2025 increased to $15.9 million from $4.7 million in Q3 2024, reflecting a 235% rise attributed to increased headcount and operational growth [288]. - Net loss for Q3 2025 was $13.4 million, a 203% increase from a net loss of $4.4 million in Q3 2024 [284]. - For the nine months ended September 30, 2025, revenues were $3.6 million, a 64% increase from $2.2 million in the same period of 2024, with hardware revenue up by $0.9 million and recurring software revenue up by $0.4 million [292]. - Operating expenses for the nine months ended September 30, 2025 were $38.2 million, a 35% increase from $28.3 million in the same period of 2024, driven by higher research and development, sales and marketing, and general administrative expenses [296]. - The company reported a net loss of approximately $47.2 million for the nine months ended September 30, 2025, with cash used in operating activities amounting to approximately $30.4 million [309][318]. Capital and Funding - The company raised $25 million through a private placement of Series 10 Convertible Preferred Stock, receiving net proceeds of approximately $23.1 million after expenses [242]. - The Series 10 Preferred Stock has a stated value of $1,000 per share and offers a cumulative dividend of 12% annually, payable quarterly [247]. - The company closed a PIPE Offering on November 12, 2025, issuing 25,000 shares of Series 10 Convertible Preferred Stock for gross proceeds of $25.0 million [311]. - For the nine months ended September 30, 2025, net cash provided by financing activities was approximately $58.6 million, significantly higher than the $11.9 million reported for the same period in 2024 [323][324]. Strategic Acquisitions and Investments - The company acquired Drone Nerds and Anzu Robotics for a total consideration of approximately $41.6 million, including $20 million in cash and $11.9 million in promissory notes [239]. - The company incurred approximately $1.2 million in advisory fees related to the acquisitions of Drone Nerds and Anzu Robotics [241]. - The Company made a strategic investment of $2 million in Valkyrie Sciences Holdings LLC through a convertible promissory note, with an interest rate of 10% per annum [252]. Operational Changes and Future Outlook - The company has not generated any revenue from aircraft sales as it is still in the design and development phase of the TriFan 600, and will need to raise capital for future operations [230]. - The company reported two segments: Commercial Aviation (pre-revenue) and Industrial IoT, with a strategic shift towards software sales in the Industrial IoT segment [233]. - The company is exploring strategic options to wind down or sell the hardware portions of its Industrial IoT business to focus on software products [233]. - Research and development expenses are expected to increase significantly as the Company builds aircraft prototypes and explores new technologies [273]. - General and administrative expenses are anticipated to rise substantially as the Company increases headcount to support research and development and commercialization efforts [277]. - The company has incurred net losses and negative operating cash flows since the XTI Merger completed on March 12, 2024, and expects to continue this trend until sustainable commercial operations commence [312]. Cash and Working Capital - Cash and cash equivalents increased by approximately $28.1 million from December 31, 2024, primarily due to net proceeds from public offerings [305]. - As of September 30, 2025, the company had no interest-bearing debt outstanding, following the repayment of secured promissory notes and other obligations [305]. - Working capital improved to approximately $1.1 million as of September 30, 2025, compared to a deficit of $8.8 million at the end of 2024 [302]. - Cash and cash equivalents as of September 30, 2025, were approximately $32.2 million, with working capital adjusted to $29.3 million when excluding derivative warrant liabilities [309]. - As of September 30, 2025, the company received approximately $1.4 million in cash from customer deposits related to aircraft pre-orders, which will not be recognized as revenue until delivery [307].