Item 1. Business
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.
Headquartered in Englewood, Colorado, the Company is developing a vertical
takeoff and landing (“VTOL”) airplane that is designed to take off and land like a helicopter and cruise like a fixed-wing
business airplane. We believe our initial configuration, the TriFan 600 airplane, will be one of the first civilian fixed-wing VTOL airplane
that offers the speed and comfort of a business airplane and the range and versatility of VTOL for a wide range of customer applications,
including private aviation for business and high net worth individuals, emergency medical services, and regional charter air travel. Since
2013, we have been engaged primarily in developing the aerodynamic performance and top-level engineering design of the TriFan 600, building
and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors
to enable the Company to advance the detailed design and certification of the TriFan 600, and to eventually engage in commercial production
and sale of the TriFan 600.
We continue to work to optimize our airplane design for both manufacturing
and certification. The development of a VTOL airplane that meets our business requirements demands significant design and development
efforts on all facets of the airplane. We believe that by bringing together a mix of talent with VTOL and traditional commercial aerospace
backgrounds, we have built a team that enables us to move through the design, development, and certification of our VTOL airplane with
the FAA in an efficient manner, thus allowing us to achieve our end goal of bringing to market our airplane as efficiently as possible.
To date, we have not generated 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. 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.
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. 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.
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. 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. 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. 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. 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. We may enter into one or more additional
non-binding letters of intent in connection with our due diligence and strategic transaction evaluation process. 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. 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. 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.
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.
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.
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). 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. 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. 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. 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. 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.
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. 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. 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. 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.
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. We believe that the target TriFan 600 airplane will provide unique advantages over existing helicopters, turboprop and light jet
airplane. 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. 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. 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.
Real-Time
Location Systems (RTLS) & IIoT Solutions
Our real-time location systems (RTLS) & IIoT solutions consist of the following software and hardware products. 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. 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. 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. The digital twin of a physical space facilitates use cases for facility
management, security safety, customer or worker experiences, asset tracking and more.
● IoT
Devices, Sensors and Tags - Our RTLS asset tracking hardware includes a full end-to-end
portfolio of IoT sensors (also known as nodes or anchors) and tracking tags to track assets
or personnel. This portfolio leverages our own products for ultra-wideband (UWB) and chirp
spread spectrum (CSS) and GPS while incorporating support for third party integrated BLE,
RFID and LiDAR solutions. In the security space, a version of our sensor enables detection
of cellular, Wi-Fi and BLE signals that is combined with UWB to offer security and high value
asset tracking solutions. Chirp technology is effective for longer range communication while
UWB is an important RF standard for pinpoint asset tracking. Organizations across many different
industries can leverage the accuracy, low-latency, and reliability of both technologies to
track the real-time location and status of key assets and equipment, with precision. Users
can display and track the static location and movement of assets and asset attribute information
within a space on indoor maps.
● Transceivers/Modules
- Our nanoLOC transceiver is a low-power, highly integrated mixed-signal chip. This 2.4
GHz long range CSS transceiver transmits and receives wireless data packets for robust wireless
communications, ranging capabilities, and real-time location determination. Our chirp leverages
a patented, Company-owned technology and offers range comparable to Wi-Fi systems with accuracy
of BLE or UWB in some scenarios. Supporting a freely adjustable center frequency with three
non-overlapping frequency channels, amongst others, our nanoLOC enables multiple physically
independent networks and improved coexistence with existing 2.4 GHz wireless technologies.
This product is also available in a module form to allow easier integration for our partners
and integrators.
● Analytics
and Insights - Our cloud-based analytics platform allows data from multiple sensors and
data sources to be visualized for action by the customer. Our platforms can engage with data
from our IoT sensors, mobile apps, third-party sensors and data that is ingested via an application
programming interface (“API”) or data import. Analytics enable, for instance,
factory operators to visualize and analyze the flow of products through the facility to address
bottlenecks and improve efficiency and productivity.
● Wireless
Device Detection for Security – Our wireless detection and positioning solutions
help cultivate situational awareness and identify security risks by leveraging sensors with
proprietary technology that can detect and position active cellular, Wi-Fi, Bluetooth, and
UWB signals throughout a venue. This solution allows for the positioning of people and assets
homogeneously as they travel in a controlled space and empowers customers to make key decisions
around security, risk mitigation and public safety, at scale. Utilizing various radio signal
technologies permits device positioning with accuracy ranging from several meters down to
approximately thirty centimeters, depending on the product deployed and conditions in the
indoor space. The technology allows for detailed understanding of space and resource utilization,
and in security applications it enables detection and identification of authorized and unauthorized
devices, prevention of rogue devices through alerts based on rules when unknown devices are
detected in restricted areas and asset tracking with centimeter level precision.
3
Positioning
Innovation Powered by Machine Learning
In
2025, we intend to continue to explore the use of machine learning and artificial intelligence (“AI”) to improve positioning
accuracy, reliability and range which would provide additional benefits to existing customers and unlock new opportunities for our RTLS
technology. Here is an example of how we are utilizing AI to enhance our technology: due to fluctuating frequency plotting in the beginning
of a project, but after applying advanced AI filter methods and machine learning algorithms we can better understand the radio frequency
(RF) behavior as to how the time difference of arrival (TDoA) sync path should be configured in the specific environment considering
several attributes. Following these enhancements, we believe our products will be able to assist in providing predictive, more accurate,
bidirectional location information to secure and optimize our deployments using hardware that includes iOS and Android smartphones, IoT
sensors, access points or BLE beacons.
5G
Building
on research and development (R&D) efforts in 2024, we intend to continue to study the worldwide 5G deployments, both public and private,
to identify a robust hardware and software solution to detect and position new handsets based on this technology and explore software
defined radio solutions, as well as enhancements in antenna technology to provide our customers with additional capabilities in the security
field. This is a complex challenge and we are working with partners and customers to understand requirements, use cases and solutions.
Analytics
and Insights
Inpixon
Analytics on-premises or in the cloud, along with specially-optimized algorithms and industry specific dashboards that are intended to
provide better visibility, predictive maintenance, process optimization, security and safety, and data-driven decision-making. Improved
visibility gives real-time locations and status of assets, people, and equipment both indoors and outdoors. By collecting and analyzing
data from RTLS systems, organizations gain insights from asset movements and use this information to optimize their operations. Predictive
maintenance reduces downtime and maintenance costs, as well as improve the lifespan of equipment. Process optimization helps improve
productivity, reduce costs, and enhance customer satisfaction. Security and safety helps prevent accidents, reduce the risk of theft,
and enhance the overall safety of employees and customers. Data-driven decision making by analyzing data from RTLS systems, organizations
gains a better understanding of their operations, identify areas for improvement, and make data-driven decisions that drive business
value. Furthermore, we are continuing to enhance the integration of ChatGPT, a generative artificial intelligence (AI), into our RTLS
solutions. This innovative integration expands the capabilities of our RTLS, enabling rapid, AI-assisted insights as well as interactive
discussions in a conversational medium. Operations managers in production and logistics, in particular, stand to benefit from this transformative
development.
Research
and Development
TriFan
600
We plan to seek FAA certification
of the TriFan 600 under the FAA’s new “Powered Lift” aircraft category. Initial concept and engineering analysis
for the TriFan 600 was completed in July 2015. Legacy XTI built a 65% scale prototype and in May 2019 began initial hover tests.
The prototype was successfully hover-tested multiple times. Subsequent to raising private funding during 2021, Legacy XTI hired a
number of engineers (employees and consultants) to establish its core engineering organization. Additionally, Legacy XTI retained
consulting firms to provide specialized engineering technical knowledge to complement XTI’s team.
4
In 2022, Legacy XTI updated the exterior design of the TriFan 600,
including the location of the wing fans and the horizontal tail, to improve the performance and efficiency of the airplane. Design and
engineering for other systems, including the propulsion system, landing gear, cockpit visibility, cabin sizing and structural integrity
were also advanced during 2022 and 2023. Legacy XTI identified the initial supply chain and began negotiating with key suppliers globally.
As a result of these efforts, Legacy XTI has established a baseline bill-of-materials.
Following
a series of scaled model tests and Computational Fluid Dynamic (CFD) analysis, the engineering team further enhanced the aerodynamic
performance and stability of the TriFan 600 and released its latest configuration, C211.2, and included a larger vertical stabilizer,
enhanced duct and stator designs, new engine air inlets and exhaust, an updated drive train, and additional system design. The C211.2
configuration is currently undergoing CFD analysis at Oak Ridge National Laboratory. In addition, the engineering team continues to evolve
the Digital Mockup (DMU), mass properties (i.e., weight) and Global Finite Element Modeling (GFEM) analysis.
In 2024, the Company engaged
the FAA in a General Familiarization (Gen Fam) briefing for the TriFan 600. Follow-up meetings with FAA Subject Matter Experts (SME) began
in early 2025 and will continue throughout the year to help assess safety, certification standards and potential certification challenges
and obstacles. In March 2025, the Company submitted its TriFan 600 Type Certification application and G-1 “basis of certification”
to the FAA for review. The G-1 addresses the latest draft Powered Lift Category guidelines and identifies areas unique to the TriFan 600
and intended means of safety and compliance.
The
Company is currently working through the TriFan 600’s Preliminary Design Review (“PDR”) update, which we expect to
complete in early 2026. During this PDR update, the Company will be refreshing the TriFan 600 vendor / supplier list. For critical suppliers,
we will begin signing phased contracts during the first half of 2025. Once the PDR phase is completed, we expect that almost all suppliers
for the TriFan 600 will have been identified and most under contract. Supplier systems and subsystems will be integrated into our PDR
configuration, C212. We will engage a handful of outside experts to be part of our PDR participants to help assess our PDR “exit”
readiness.
After PDR, we will launch our detailed design phase culminating in
a Critical Design Review (“CDR”). This phase will include further interactions with suppliers to develop and mature major
structures and systems of the airplane. With input from industry-respected suppliers, we believe all systems of the TriFan 600 can be
incorporated into the airframe to deliver a fully integrated solution. The fulfillment of this phase is expected to pave the way for approving
engineering designs used to build the airplane. The CDR phase will also include ongoing communication with the FAA to discuss and maintain
awareness of our compliance with federal regulations. We expect this phase to take approximately 12 to 18 months.
Following the completion of the CDR phase, we will begin fabricating
and constructing our full-scale flight test airplane and working towards first flight. After a successful first flight activities, the
certification from the FAA is expected to take an additional 18 to 24 months to achieve. As such, we anticipate FAA type certification
of the TriFan 600 in 2030.
RTLS
& IIoT Solutions
Our
management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain
a competitive position. Our RTLS products intersect many emerging fields including metaverse, augmented reality, occupancy planning,
industry 4.0, smart cities, and more, and we continue to innovate and patent new methods to solve problems for our customers.
5
Sales
and Marketing
TriFan
600
Our
sales channels include direct sales as well as indirect sales channels which may include
one or more regional sales agents or brokers. Indirect sales partners may also provide a
range of pre- and post-sales services to our customers including aftermarket support and
maintenance, repair and overhaul (“MRO”) services using XTI Aerospace parts.
In 2023, we entered into a commercial agreement with a sales and distribution
agent for prospective sales of the TriFan 600 airplane and MRO services in certain markets, including 21 countries of the Middle East
and North Africa. We have been in discussions with other sales and distribution agents throughout the world and plan to expand our global
territory reach via commercial agreements.
We intend to market our airplane through customer-targeted marketing
campaigns (e.g., EMS, land management, oil & gas) utilizing our digital presence, webinars, podcasts, national and regional trade
shows, conferences, and other media. To best identify target customers, we intend to utilize a Customer Advisory Board – a focus
group to solidify the “voice of the customers” and allow us to map customer requirements and use cases to our available features,
functions and options.
RTLS
& IIoT Solutions
Our
sales channels include direct sales as well as indirect sales through channel partners including original equipment manufacturers (OEMs),
integrators, resellers and distributors. Indirect sales partners may provide a range of pre- and post-sales services to our customers
including system design, installation, commissioning and service.
Direct
sales representatives are compensated with a base salary and may participate in incentive plans such as commissions or bonuses.
We
market our products through industry-focused as well as account-based marketing strategies which utilize SEO, advertising, social media,
trade shows, conferences, webinars and other media.
Our
RTLS products are primarily sold on a license and SaaS mode, which we call “location as a service” or “LaaS.”
In our licensing model, we also typically charge an annual maintenance fee. The LaaS model is typically for a 3-5 year contract and includes
license to use, maintenance and hardware upgrades. The LaaS model generates a recurring revenue stream.
Customers
TriFan
600
We previously had a pre-sales program that included refundable deposits
for the TriFan 600 airplane that we intend to reopen later in 2025. Most pre-orders do not include deposits. Pre-sale agreements generally
provide customers a delivery slot for their airplanes. The deposits we have received do not create an obligation on the part of the customer
to purchase an airplane, and a customer may request the full return of its refundable deposit. Most pre-orders are subject to the execution
of a definitive purchase agreement between us and each party that contains the final terms for the purchase of our TriFan 600 airplane,
including, but not limited to, the final number of airplanes to be purchased and the timing for delivery of the airplanes. 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.
We have non-binding purchase orders for the purchase of 140 TriFan
600 airplanes, including a non-binding pre-order for the purchase of 100 TriFan 600 airplanes by Mesa Airlines, Inc. (“Mesa”)
pursuant to that certain conditional aircraft purchase agreement, dated February 2, 2022, by and among Legacy XTI, Mesa Airlines and Mesa
Air Group, Inc. Mesa’s purchase obligations under such agreement are conditioned upon, among other things, certification of our
airplane by the FAA and the agreement by the parties of all material terms of the transaction including, but not limited to, delivery
dates, airplane specifications, warranties, remedies, milestones relating to the development of the TriFan 600, the type and extent of
assistance to be provided by Mesa in obtaining certification of the TriFan 600, branding and marketing matters, and optional equipment
in the airplane. If the parties do not agree on such material terms, either party has the right to terminate the agreement if such party
determines in its discretion that it is not likely that the material terms will be agreed to in a manner consistent with such party’s
business and operational interests (as those interests may change from time to time).
6
Additionally, we have entered into non-binding options to purchase
an aggregate of 40 airplanes with potential purchasers located in the United States and Europe. We have entered into non-binding aircraft
reservation deposit agreements for an aggregate of 114 airplanes with potential purchasers located in the United Kingdom, Ireland, Australia,
Dubai, India, Japan, Brazil, and the United States. Customers making reservation deposits are not obligated to purchase any airplanes
until they execute a definitive purchase agreement. We have written letters of intent (without deposits) with customers for an additional
105 airplanes. Customers may request a return of their refundable deposits any time up until the execution of a purchase agreement. These
conditional orders and reservations represent the potential of more than $3.0 billion in future gross revenue upon delivery of those airplanes,
assuming the low end of our current list price range of $10 million per airplane assuming we can execute on the development program for
the TriFan 600, secure FAA certification, and deliver these airplanes.
RTLS
& IIoT Solutions
Our
RTLS offerings which include real-time location tracking, collision avoidance and wireless device detections are used around the world
in automotive factories, heavy equipment factories, logistics and distribution warehouses, mining operations, government and military
buildings, and corporate offices.
During
the year ended December 31, 2024, four customers accounted for over 10% of revenue (23%, 14%, 13%, and 11%, respectively). The Company
had no revenue during the year ended December 31, 2023.
Competition
TriFan
600
The private jet and private business aircraft markets are highly competitive,
and we face a significant number of original equipment manufacturer competitors, most of which are larger, better known and have better
financial resources than us. When the TriFan 600 goes into production, we believe it will compete with other aircraft manufacturers by
providing our customers with what we believe is a unique airplane with distinct and largely unique performance capabilities at a competitive
purchase price. We believe the TriFan 600 airplane will be one of a small number of aircraft that offers the speed, range and comfort
of a business airplane with the versatility of VTOL. As we expect that the TriFan 600 will be capable of flying greater distances and
on average at twice the speed and three times the range of competing helicopters, we expect the TriFan 600 to offer lower direct operating
costs (cost per flight hour) and be able to fly almost twice as many missions, thus generating additional cost savings and revenue for
airlines and aircraft operators when compared with helicopters.
RTLS &
IIoT Solutions
Our
RTLS business is characterized by innovation and rapid change. Our RTLS Indoor Intelligence products compete with companies such as Aruba,
Cisco, Juniper Networks/Mist Systems, Ubisense, Sewio, Kinexon, Zebra Technologies and other mostly vertical focused RTLS companies.
Some competitors determine positioning primarily using BLE or Wi-Fi and, therefore, we believe they cannot achieve the same accuracy
that we do and so cannot meet some customers’ needs. Many RTLS competitors are focused on one technology and/or vertical and, at
this time, we believe none of them have as complete an offering of tags, anchors, positioning, engine, software, integrations and analytics.
We
believe we offer a unique and differentiated approach to the market with our industrial RTLS which is:
● Comprehensive .
We offer full-stack RTLS solutions which seamlessly integrates tracking tags, anchors, sensors,
positioning engine, software, and connections to third-party systems. We integrate a myriad
of indoor data inputs and outputs. With a single platform we can support a multitude of use
cases across numerous industries in both the private and public sector.
● Scalable .
Our solutions are built to support customers’ expanding needs and use cases. Unlike
many other competitive point-solutions, we can offer expansion paths and support for a wide
variety of location-based use cases at large, multi-size, global enterprises. Our multi-layered
depiction of indoor data allows users to see the information most relevant to their role,
in the optimal format for them (e.g., charts, tables, maps, etc.).
● Technology-agnostic
and open . We embrace an ecosystem of hardware, software, integration and distribution
partners welcoming integration and synchronization with third party data and systems in combination
with our platform. Our open architecture is designed to enable the integration of disparate
technologies, preserve investment and avoid obsolescence. APIs and MQTT make it possible
to move data in and out of our platform to enable a plethora of opportunities and benefits.
7
Intellectual
Property
TriFan
600
We have received a utility
patent (US Patent 9,676,479) and a design patent (US Patent D741247) for a VTOL airplane that includes a pair of ducted lift/thrust fans
that are rotatably moveable between the lift and thrust positions. Based on those U.S. patents, the Company has also applied for and has
been issued multiple additional foreign utility patents, including from China, Japan, Europe and Canada. We have sought to protect our
intellectual property using patents and trade secrets. Employee and third-party consultants have signed non-disclosure agreements with
Legacy XTI which include standard provisions related to assignment of work product and other requirements to further protect its proprietary
rights. We are continuing to develop intellectual property, and we intend to aggressively protect our position in key technologies. We
own several trademarks protecting Legacy XTI’s name and logo. Our intellectual property also includes extensive data, engineering
analyses and other know-how.
We have obtained broad patent
protection in both respects through the above-referenced patents. Under the European patent, we have applied for issuance of patents
in the U.K., France, Germany, and Italy, where we expect the airplane will be sold and used. Patents are also pending in Brazil.
RTLS
To
establish and protect our proprietary rights, we rely on a combination of patents, trademarks, copyrights, trade secrets, including know-how,
license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment
agreements, and other contractual rights. We do not believe that our proprietary technology is dependent on any single patent or copyright
or groups of related patents or copyrights. We believe the duration of our patents is adequate relative to the expected lives of our
products.
In connection with the Company’s
disposition of its enterprise app business lines to CXApp, Inc. in March 2023 (see Part III, Item 11 “Executive Compensation —
Completed Transaction Bonus Plan” for more information about this disposition), each of the Company and CXApp, Inc. granted the other
party (each, a “Licensee”) a limited worldwide, non-exclusive, irrevocable, royalty free, fully paid up, perpetual license
to use, practice and otherwise exploit such intellectual property (with certain exceptions) that is owned, controlled or purported to
be owned or controlled by the other party (the “Licensor”) to the extent used, practiced or otherwise exploited in the business
of the Licensee during the twelve (12) months prior to the separation or is reasonably anticipated to be used after the separation for
the conduct of any business of the Licensee as conducted on or prior to the separation and reasonably anticipated extension or evolutions
thereof that are not substitutes for any product or service of the Licensor.
Government
Regulation
In
general, 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, anticorruption, import/export controls, trade restrictions, internal and disclosure
control obligations, securities regulation and anti-competition.
Violations
of one or more of these diverse legal requirements in the conduct of our business could result in significant fines and other damages,
criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations
or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result
in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage,
restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations.
To date, compliance with these regulations has not been financially burdensome.
Aviation
Regulations
In
the U.S., civil aviation is regulated by the FAA, which controls virtually every aspect of flight from pilot licensing to aircraft design
and construction, and use of the public air space within the boundaries and territorial waters of the United States. The FAA requires
that every civilian aircraft that flies in the U.S. carry a valid “type certificate” and airworthiness certificate issued
by the FAA or a foreign civil aviation authority.
We intend to seek approval for the design of the TriFan 600 by obtaining
a standard Type Certificate under Federal Aviation Regulations, in particular the criteria set forth under the “Powered Lift”
regulations. In March 2025, the Company submitted its Type Certification application to the FAA. The FAA will oversee extensive testing
and analysis of the TriFan 600 to confirm the airplane’s safety, stability, reliability, performance, and compliance with the applicable
airworthiness standards.
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In addition, once the FAA issues a type certificate to the Company,
we intend to apply for a production certificate, the FAA’s approval required for the manufacture of an FAA-approved type design,
to enable the Company to manufacture the TriFan in commercial quantities. TriFan 600 airplane that are manufactured by XTI in accordance
with the type certificate and the production certificate will be delivered to customers along with a certificate of airworthiness. To
obtain a production certificate from the FAA, we must demonstrate that our organization and our personnel, facilities, and quality system
can produce the airplane such that they conform to the approved design.
Since
we are not permitted to deliver commercially produced aircraft to customers until any such aircraft has obtained FAA certification, no
material aircraft sales revenue will be generated before receipt of FAA certification. The process of obtaining a valid type certificate,
production certificate and airworthiness certificate for the TriFan 600 will take several years.
In
addition to the FAA, customers’ operation of the TriFan 600 will be regulated by various state, county, and municipal agencies.
Specifically, flight of the TriFan 600 will be regulated by the FAA, while the ability to take off and land will be governed by the FAA
and various zoning restrictions imposed by non-federal agencies in each location where an owner of the TriFan 600 intends to operate.
These restrictions vary by location. Some government and private locations in the U.S. and around the world limit or prohibit the use
of aircraft. There are currently over 5,000 helipads in the U.S. where helicopters are allowed to land. Thus, we expect that customers
will be able to legally land the TriFan 600 in these locations and at thousands of other paved areas or grassy areas, job sites, residential
and commercial locations in the U.S. and around the world where it’s safe and legal to land VTOL aircraft, as well as smaller general
aviation airports unavailable to conventional business aircraft and jets.
Employees
As of April 11, 2025, we have 47 employees, including 4 part-time employees,
which includes all employees of our subsidiaries. This includes 3 officers, 7 sales personnel, 4 marketing personnel, 20 technical and
engineering personnel and 9 finance, other executive, legal and administration personnel.
Business
Combination
On
July 24, 2023, we entered into an Agreement and Plan of Merger (amended on December 30, 2023 and March 12, 2024, the “XTI Merger
Agreement”) by and among us, Superfly Merger Sub Inc., a Delaware corporation and our then wholly-owned subsidiary (“Merger
Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”). Pursuant to the XTI Merger Agreement, on March
12, 2024 (the “Closing Date”), Merger Sub merged with and into Legacy XTI (the “XTI Merger”), with Legacy XTI
surviving the XTI Merger as our wholly-owned subsidiary. Following the effective time of the XTI Merger (the “Effective Time”)
on the Closing Date, we amended our articles of incorporation to change our name from “Inpixon” to “XTI Aerospace,
Inc.” and the combined company opened for trading on the Nasdaq Capital Market on March 13, 2024 under the new ticker symbol “XTIA”.
Immediately prior to the Effective
Time, we effected a 1-for-100 reverse split of our outstanding shares of common stock.
Corporate
Information
We
currently have two direct, wholly-owned operating subsidiaries: XTI Aircraft Company, based in Englewood, Colorado (at our corporate
headquarters), and Inpixon GmbH (previously Nanotron Technologies GmbH), based in Berlin, Germany. IntraNav GmbH, based in Eschborn,
Germany (“IntraNav”), is an indirect subsidiary of the Company and the wholly-owned subsidiary of Inpixon GmbH.
Our
principal executive offices are located at Centennial Airport at 8123 InterPort Blvd., Suite C, Englewood, Colorado 80112. This facility
houses our principal executive office, finance, and other administrative activities, although our employees and consultants mostly work
remotely. Our engineers are working remotely throughout the U.S.
We
believe that our facility in Colorado meets our needs for the immediate future. During 2024, we commenced a site selection process to
identify a facility located at an airport within the continental U.S. that will allow us to consolidate engineers and other administrative
employees, perform flight simulations, perform propulsion rig and prototype flight tests, and potentially expand to a full production
site with a facility for pilot training. It is not yet determined whether our corporate headquarters will change from the current location
at Centennial Airport.
Our
telephone number is (800) 680-7412. We have also agreed to sublease office space in Palo Alto, California. Two of our subsidiaries, Inpixon
GmbH and IntraNav, maintain offices in Berlin Germany, and Eschborn, Germany, respectively. Our Internet website is www.xtiaerospace.com.
The 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.
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