XTI Aerospace, Inc.

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.

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.

• We may incur significant costs to honor warranties, provide service, repairs, maintenance and technical support for UAS products we distribute or service, and failures in these activities could adversely affect our business, financial condition and results of operations.
• Licenses and regulatory authorizations required for certain UAS products may be difficult to obtain in the future, which could adversely affect our ability to sell certain products.
• The nature of our UAS business and, to the extent we resume the TriFan 600 program, aircraft development activities involves significant risks and uncertainties, including product liability exposure, that may not be covered by insurance or indemnification.
• The growth of our UAS business depends on increasing sales to existing customers and obtaining new customers, which, if unsuccessful, could limit our financial performance.
• Our business may be dependent on a limited number of significant customers, and the loss of one or more such customers could adversely affect our operating results.
• If we are unable to collect our receivables in a timely manner, our liquidity, working capital and results of operations could be adversely affected.
• 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.
• 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.
• We have no guarantee of receiving government contracts, and our failure to do so would materially harm our revenues and growth prospects.
• Government contracts are subject to termination for convenience, funding reductions, and regulatory changes that could eliminate anticipated revenues without recourse.
• The defense procurement process is lengthy, unpredictable, and resource-intensive, and we may expend significant capital pursuing contracts that are never awarded.
• We operate in a highly competitive market for autonomous unmanned systems, and many of our competitors have substantially greater resources, established relationships, and proven contract histories.
• Our autonomous systems may fail to meet evolving military performance, reliability, and interoperability requirements, which could disqualify us from contract competitions or result in contract termination.
• We may be unable to obtain or maintain the security clearances, certifications, and regulatory authorizations required to pursue and perform classified or sensitive government programs.
• We are subject to the risk that changes in U.S. defense spending, budget sequestration, or shifts in national security priorities will reduce or eliminate the market for our products and services.
• We may rely on teaming arrangements and subcontracts with prime contractors whose decisions and performance are outside of our control and who may become our competitors.
• Our ability to scale ADS operations is dependent on recruiting and retaining personnel with specialized expertise in autonomous systems, defense engineering, and government program management — talent that is in high demand and limited supply.
• The TriFan 600 aircraft program has been paused, and if resumed, may never achieve certification, commercial production or market acceptance.
• The strategic reorientation of our former XTI Aircraft division toward unmanned systems development introduces significant new execution risks.
• While our current operations are primarily focused on our UAS solutions business, if we resume the TriFan 600 program, the program will be subject to significant development, certification, and financing risks. Any resumption of active TriFan 600 development could divert management attention and financial resources from our UAS operations and adversely affect our business, financial condition and results of operations.
• Customer orders and service engagements for our UAS products and services and the pre-orders we have received for our aircraft may be non-binding, conditional or written expressions of interest and may be terminated at any time prior to execution of a definitive agreement, and cancellations, modifications or delays could materially adversely affect our business, liquidity and cash flows.
• Our drone operations may be adversely affected by weather conditions and other environmental factors beyond our control.
• We operate in highly competitive markets characterized by rapid technological change, and we may be required to reduce prices or modify our offerings to remain competitive, which could adversely affect our results of operations.
• If we are unable to obtain and maintain adequate facilities and infrastructure, we may be unable to effectively store, service, repair and distribute UAS products or develop and manufacture our products as our business grows.
• Our UAS operations depend on trained drone operators, technicians and other qualified personnel, and competition for such personnel is significant. If the TriFan 600 program is resumed, pilot and mechanic availability could affect the commercialization of the aircraft.
• We may be adversely affected by interruptions in production or supply chain disruptions that are beyond our control, including disruptions impacting suppliers of UAS products or aircraft components if the TriFan 600 program is resumed.
• UAS Operations
• Our research and development efforts may not produce successful products or capabilities that result in significant revenue, cost savings or other benefits.
• 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.
• Our ability to use net operating loss carryforwards and other tax attributes may be limited.
• 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.
• 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.
• Investors’ expectations and regulatory requirements relating to environmental, social and governance (“ESG”) matters may impose additional costs and expose us to new risks.
• 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.
• The ongoing impact of geopolitical conflicts, including the Russia-Ukraine conflict and conflicts in the Middle East, may adversely affect our business, operations and financial condition.
• Changes in U.S. administrative policy, including tariffs, import restrictions, trade agreements and other trade measures, could adversely affect our supply chain economics and financial performance.
• Difficult conditions in the global economy and capital markets may materially adversely affect our business, results of operations and access to capital.
• 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.
• Our asset-based revolving credit facility contains borrowing base limitations, financial and operational covenants, and is secured by substantially all of the assets of our UAS operations, and any default could materially adversely affect our liquidity and operations.
• We may be unable to repay the Notes issued in connection with the Drone Nerds acquisition.
• We may not be able to successfully integrate the business and operations of Drone Nerds or other entities that we have acquired or may acquire in the future, and we may not realize the intended benefits of these acquisitions. In addition, we may be exposed to unanticipated liabilities or risks arising from the historic operations of acquired businesses, which could materially and adversely affect our business, financial condition and results of operations.
• We have completed several strategic transactions, including acquisitions and dispositions, which may make it difficult for investors to evaluate our business and prospects, and future acquisitions or dispositions could disrupt our business and harm our financial condition or operating results.
• 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 may make strategic investments in early-stage companies or technologies that fail to generate returns or result in significant losses or impairment charges.
• Our business depends on experienced and skilled personnel, and if we are unable to attract, retain and integrate such personnel, or if we lose key personnel, our operations and strategic execution may be adversely affected.
• 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.
• We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
• 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.
• Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results and cash flows.
• We rely on key information technology systems and third-party cloud service providers, and any disruption, failure, or degradation of these systems could adversely affect our operations and financial results.
• 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.
• We may be unable to maintain effective internal control over financial reporting and disclosure controls and procedures, which could adversely affect our ability to accurately report our financial results and maintain investor confidence.
• Our business and operations expose us to numerous legal and regulatory requirements, including privacy, cybersecurity, surveillance, anti-corruption, trade compliance, import/export and other laws, and violations of these requirements could harm our business. In addition, our operations and supply chain expose us to geopolitical, economic and other risks associated with international business.
• Domestic and foreign regulation and enforcement of data privacy, cybersecurity, surveillance and data tracking technologies is expansive, broadly defined and rapidly evolving, and compliance with such regulation could result in additional costs and liabilities, restrict portions of our business, constrain our customers’ use of our products and services or limit the growth of our markets. Any actual or perceived failure by us to comply with data privacy regulations could result in proceedings, investigations, enforcement actions or penalties against us.
• Misuse of our products could harm our reputation and result in litigation, regulatory enforcement actions or reduced demand for our products and services.
• Our failure to maintain compliance with the continued listing requirements of the Nasdaq Capital Market may result in our common stock being delisted from the Nasdaq Capital Market, which could negatively impact the price of our common stock, liquidity, our ability to access the capital markets and our stockholders’ ability to sell their shares.
• Our stock price may be volatile, and your investment may suffer a decline in value as a result of the volatility of our stock.
• Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
• Sales of our common stock or other securities, or the perception that future sales may occur, may cause the market price of our common stock to decline, even if our business is doing well.
• There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
• The Class B Units of XTI Drones Holdings, LLC issued in connection with our acquisition of Drone Nerds are exchangeable into shares of our common stock and will be automatically exchanged in February 2027, which will result in dilution to our existing stockholders.
• We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could negatively affect the value of our common stock.
• If our common stock becomes subject to the penny stock rules, it would become more difficult to trade our shares.
• 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.
• 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.
• Nevada Anti-Takeover Law may discourage acquirers and eliminate a potentially beneficial sale for our stockholders.
• 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.
• The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.