What changed in this filing

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Item 1. Business

2026-04-15 compared with 2025-04-15 · 514 added, 530 removed, 0 unchanged (100% of the section changed)

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.

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.

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.

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.

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

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.

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.

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.

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

We believe that the target TriFan 600 airplane will provide unique advantages over existing helicopters, turboprop and light jet

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.

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.

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.

RTLS SaaS Platform - Our full stack offering in the Industrial IoT space includes an

enterprise class, multi-technology RTLS IoT platform for industrial automation.

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

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.

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.

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.

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.

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.

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.

Innovation Powered by Machine Learning

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

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.

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

This is a complex challenge and we are working with partners and customers to understand requirements, use cases and solutions.

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.

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.

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

Furthermore, we are continuing to enhance the integration of ChatGPT, a generative artificial intelligence (AI), into our RTLS

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

and Development

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.

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.

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.

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.

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.

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”

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.

& IIoT Solutions

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.

and Marketing

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.

& IIoT Solutions

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.

sales representatives are compensated with a base salary and may participate in incentive plans such as commissions or bonuses.

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.

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.

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.

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).

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.

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.

& IIoT Solutions

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.

the year ended December 31, 2024, four customers accounted for over 10% of revenue (23%, 14%, 13%, and 11%, respectively).

had no revenue during the year ended December 31, 2023.

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.

IIoT Solutions

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.

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.

Our solutions are built to support customers’ expanding needs and use cases.

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

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.

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

We are continuing to develop intellectual property, and we intend to aggressively protect our position in key technologies.

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.

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

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.

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.

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.

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”

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.

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.

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.

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.

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

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.

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.

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.

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.

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

Our engineers are working remotely throughout the U.S.

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.

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.

XTI Aerospace is a provider of unmanned aerial systems (“UAS”)

solutions operating through two business divisions:

a commercial drone solutions business and an advanced systems and defense division.

The Company expects to continue developing a third business division, a domestic manufacturing and technology division.

The Company’s

commercial drone solutions business, conducted primarily through its majority owned subsidiary, XTI Drones Holdings, LLC, which owns Drone

Nerds, LLC and Anzu Robotics, LLC (collectively, “Drone Nerds”), constitutes substantially all of the Company’s revenues.

The advanced systems and defense division (formerly XTI Aircraft) is in an earlier stage of development and has not yet generated any

The Company was originally founded

around the development of the TriFan 600, a planned vertical takeoff and landing (“VTOL”) aircraft.

In 2025, the Company acquired

Drone Nerds and, in light of that acquisition and its assessment of near-term opportunities in the unmanned systems market, redirected

its former XTI Aircraft division beginning in 2026 toward the design and development of unmanned platforms for defense and commercial

applications.

The TriFan 600 program has been paused and the underlying intellectual property and engineering work product is being preserved

and maintained.

See “Business Divisions — TriFan 600 Strategic Context and Organizational Evolution” below for additional

The Company’s near-term focus is on growing its commercial drone

platform, expanding the range of products and services offered to enterprise and government customers, and pursuing strategic acquisitions

that extend its geographic reach and customer base.

The Company also is seeking to generate revenue from its advanced systems and domestic

manufacturing divisions.

The Company’s strategy is organized around three priorities:

Expand the commercial drone distribution and services platform by growing the customer base, increasing

revenue per customer, and improving operating margins, supported by proprietary data on customer purchasing behavior across product categories,

geographies, and markets;

Pursue targeted acquisitions to expand geographic reach, add complementary capabilities, and deepen penetration

across commercial and government markets;

Develop capabilities in advanced unmanned systems technology, domestic manufacturing, and defense-oriented

products and services to position the Company as a broader UAS solutions provider.

Corporate Strategy

XTI’s objective is to build

a scalable UAS solutions platform through organic growth in its commercial business, targeted acquisitions and the staged development

of its advanced systems and domestic manufacturing capabilities.

The following describes each element of this strategy.

Strengthen the Commercial

Drone Solutions Business

The Company is focused on expanding

the scope of products and services offered through Drone Nerds to increase revenue per customer and improve operating margins.

expansion areas include training and certification programs, repair and maintenance services, fleet management support, compliance assistance,

and financing solutions.

By offering these services alongside hardware distribution, the Company seeks to increase customer retention

and establish longer-term customer relationships.

Drone Nerds operates as an OEM-agnostic

distributor, meaning it is not restricted to the products of a single manufacturer.

The Company believes this model provides a competitive

advantage by allowing it to recommend the most suitable platform for a given customer’s operational requirements, independent of

manufacturer relationships.

However, the Company’s ability to maintain this model depends on continued access to OEM products and

dealer programs, which are subject to change.

Grow Through Strategic Acquisitions

and Partnerships

The UAS distribution and services market

is highly fragmented.

The Company intends to pursue acquisitions of complementary businesses that expand its customer base, geographic

presence, or service capabilities.

The Company uses data derived from its subsidiaries, primarily from Drone Nerds, to inform acquisition

targeting decisions.

There can be no assurance that suitable acquisition targets will be identified, that acquisitions will be completed

on acceptable terms, or that acquired businesses will be successfully integrated.

The Company is also seeking to expand

its customer base in government, defense, and public safety markets.

Procurement in these markets is subject to requirements around platform

compliance, cybersecurity and domestic sourcing, which the Company believes may favor distributors with established compliance capabilities.

XTI believes it is well positioned to leverage its supply-side expertise and enterprise platform to serve these growing markets;

government procurement decisions are subject to budgetary, regulatory and political factors outside the Company’s control.

Expand Domestic Manufacturing

and Technology Capability

XTI intends to develop U.S.-based manufacturing

and advanced technology capabilities for unmanned systems through partnerships, joint ventures, and selective investments.

These initiatives

are designed to address demand from government and enterprise customers for domestically manufactured platforms, which has been increasing

as regulatory and procurement requirements around foreign-sourced systems have tightened.

These development activities are at an early

stage, and there can be no assurance that the Company will be able to execute manufacturing partnerships on acceptable terms or that demand

for domestically manufactured platforms will develop as anticipated.

Business Divisions

Commercial Drone Solutions – XTI Drones (Drone Nerds)

XTI’s commercial drone

solutions business is currently conducted primarily through Drone Nerds, a UAS solutions provider offering hardware distribution, training

and certification, repair and maintenance, fleet sustainment, compliance support, and integrated solutions to enterprise and government

Drone Nerds operates through wholesale distribution, direct sales, and direct-to-consumer retail channels, including a retail

showroom in South Florida and an e-commerce platform.

The Company believes Drone Nerds is a significant enterprise-focused UAS distributor

in the United States.

The commercial drone solutions business currently generates substantially

all of the Company’s revenues and provides the customer relationships, operational infrastructure, and market data that support

the Company’s broader acquisition and development strategy.

Autonomous Defense Systems (ADS), formerly XTI Aircraft —

Strategic Context and Organizational Evolution

The ADS division reflects a strategic shift away from the TriFan 600

program and toward nearer-term unmanned systems opportunities.

Management determined that continued development of the TriFan 600 program

would require substantial additional time and capital, and the Company therefore redirected resources toward unmanned systems opportunities

that it believes may offer nearer-term commercial applications.

In response, management conducted a structured search for new divisional

leadership with a mandate to reorient the business around nearer-term, capital-efficient opportunities.

That search concluded with the

appointment of Steve Zohrabian, whose background in advanced manufacturing and defense product development is relevant to the operational

and contractual realities of serving government and defense customers.

The acquisition of Drone Nerds

in November 2025 served as the second anchor point around which the division’s updated strategy was set.

Together, Zohrabian’s

appointment and the Drone Nerds acquisition defined the strategic perimeter of the division and marked the beginning of a transformation

in staffing, focus, and organizational priorities — a transformation substantially completed in Q1 2026.

The ADS team is now building a core capability around the design, development,

and production of unmanned platforms, with an emphasis on serving defense customers and supporting domestic procurement initiatives aligned

national security priorities.

The Company believes the unmanned systems market — particularly in defense and government

procurement — presents a more actionable near-term revenue opportunity than continued TriFan 600 development at this stage of the

Company’s evolution.

TriFan 600 Program Status

The TriFan 600 program has

The underlying intellectual property and engineering work product are being preserved.

Whether and when development may

resume will depend on a number of factors, including capital availability, market conditions for advanced air mobility, further maturation

of core technologies of the TriFan 600, such as full autonomy capabilities, and the Company’s overall strategic priorities at the

relevant time.

Autonomous Defense Systems (ADS)

The Company refers to this

division as Autonomous Defense Systems, or ADS, a provisional designation.

The division’s official name and branding have not yet been

finalized and will be disclosed in a subsequent filing upon determination.

The ADS division is focused on

the design, development, and production of unmanned platforms for defense and commercial applications, drawing on the engineering expertise

and intellectual property developed through the Company’s prior aerospace program.

The division’s capabilities span autonomous

systems design, advanced propulsion, and airframe engineering.

ADS pursues opportunities through internal development, strategic partnerships,

and co-development arrangements, with an emphasis on defense procurement programs and domestic unmanned systems initiatives aligned with

national security priorities.

As described above, the division

substantially completed its organizational transformation in Q1 2026 following the appointment of new leadership and the acquisition of

Additional information regarding the division’s official name, organizational structure, and specific strategic initiatives

will be provided as those matters are finalized.

ADS division has not yet generated any revenues.

Its ability to generate revenues will depend on success in securing development

contracts, partnerships, or procurement awards, all of which are subject to significant uncertainty.

are currently pursuing participation in five identified program opportunities with a combined potential R&D program value of

approximately $147 million.

If these development programs advance to production phases — which is subject to government

procurement decisions, budgetary constraints, shifting defense priorities, program cancellations, competitive selection processes

and other factors outside our control, and as to which there can be no assurance — and if we are able to develop the

manufacturing capabilities necessary to meet resulting demand, we estimate the associated manufacturing opportunity could reach

approximately $1.5 billion in the aggregate.

These programs span potential customer agencies that include the U.S.

Marine Corps,

Special Operations Command (SOCOM), U.S.

Air Force, U.S.

Navy, the Defense Advanced Research Projects Agency

(DARPA), and the Air Force Research Laboratory (AFRL).

See “Risk Factors — Risks Related to Our Business and

Industries” for a discussion of the material risks associated with this division.

Advanced Technology and Manufacturing (ATM)

The Company refers to this

division as Advanced Technology and Manufacturing, or ATM, a provisional designation.

The division’s official name, organizational structure,

and branding have not yet been finalized and will be disclosed in a subsequent filing upon determination.

The Advanced Technology and Manufacturing (ATM) division is expected

to be led by Alex Williams, Ph.D., and is expected to be focused on developing and scaling U.S.-based production capabilities for unmanned

systems, components, and related technologies.

The division’s mandate will be to build a domestically sourced supply chain designed

to support compliance with applicable federal procurement and sourcing requirements, including Section 848 of the National Defense Authorization

Act for unmanned aerial systems — addressing the growing demand from federal agencies, defense contractors, and enterprise customers

for drone platforms and components that meet Section 848 of the National Defense Authorization Act and satisfy applicable government procurement

requirements for compliant UAS platforms and components.

Demand for compliant, domestically

manufactured unmanned systems has accelerated as regulatory and procurement requirements around foreign-manufactured components have tightened.

The Company believes this environment creates an opportunity to develop manufacturing relationships and capabilities that may support

government and enterprise demand for compliant UAS platforms and components.

The division plans to pursue growth

through manufacturing partnerships, co-development arrangements, targeted acquisitions of domestic production capacity, and strategic

investments in U.S.-based technology and component suppliers.

The Company’s position as

a distributor and aggregator of market intelligence across the unmanned systems industry is expected to provide the ATM division with

an operational insight base that may support identifying manufacturing gaps, qualifying suppliers, and structuring partnerships that address

the specific procurement and compliance requirements of defense and government customers.

The ATM division has not yet generated

any revenues, and its activities are at an early stage of development.

The division’s ability to generate revenues will depend on

its success in establishing manufacturing partnerships on acceptable terms, securing National Defense Authorization Act (“NDAA”)

-compliant production capacity, and converting that capacity into defensible customer relationships and contract awards — each of

which is subject to significant uncertainty.

There can be no assurance that manufacturing contracts and/or partnerships will be established

on acceptable terms or that the division will generate revenues within the timeframe the Company anticipates.

Capital Strategy

XTI is executing a capital strategy designed to support disciplined

growth, fund targeted acquisitions, and accelerate the development of its three operating divisions.

The Company is working with its financial

advisors to evaluate financing alternatives that optimize flexibility and preserve shareholder value.

The commercial UAS market

has experienced growth in recent years, driven by increasing adoption across enterprise verticals including agriculture, construction,

infrastructure inspection, mining, insurance, energy and utilities, and public safety.

Defense and government applications represent an

additional and growing end market.

The overall market remains fragmented, with no single provider holding a dominant position across all

verticals and use cases.

The Company believes that consolidation among UAS distributors and

solutions providers is likely as customers increasingly prefer vendors capable of providing integrated, multi-manufacturer solutions alongside

training, maintenance, and lifecycle support.

The Company’s strategy is designed to position the Company to participate in this

trend, both through organic growth and through acquisitions.

However, the pace and direction of industry consolidation are uncertain,

and larger, better-capitalized competitors may consolidate more quickly or effectively than the Company.

Regulatory and procurement

trends have generally been favorable for domestic UAS distributors and manufacturers.

Restrictions on foreign-manufactured platforms in

certain government procurement contexts, actions by the FAA and FCC relating to UAS operations and equipment authorization, and growing

national security scrutiny of foreign-sourced unmanned systems, have all contributed to demand for compliant, U.S.-based solutions.

trends may benefit the Company, though regulatory requirements are subject to change and may also impose compliance costs or operational

constraints on the Company and its customers.

The advanced air mobility market — the market the TriFan 600

program was originally designed to address — remains at an early stage of development.

The Company does not generate revenues from

advanced air mobility and has paused the active development of the TriFan 600 program.

If the Company were to resume that program, its

prospects would depend in part on the development of regulatory frameworks, infrastructure, and customer demand for advanced air mobility,

none of which can be predicted with certainty.

The Company competes with

other UAS distributors, value-added resellers, and solutions integrators, as well as directly with OEM manufacturers that sell through

direct channels.

Certain competitors are larger and have greater financial, technical, and marketing resources than the Company.

can be no assurance that the Company will be able to compete successfully.

Products and Services

XTI delivers UAS solutions through its three operating divisions.

commercial drone solutions business is currently the primary operating division and source of revenues.

The advanced systems and defense

division and domestic manufacturing and technology division are in development and have not generated any revenues to date.

these divisions are designed to serve customers across the full UAS lifecycle — from initial platform selection and procurement

through training, deployment, maintenance, fleet sustainment, and integrated mission solutions.

Commercial Drone Solutions – XTI Drones

(Drone Nerds)

The Company’s commercial

drone solutions business is conducted primarily through Drone Nerds.

Drone Nerds provides UAS solutions through a combination of hardware

distribution and service offerings, supporting a broad ecosystem of UAS manufacturers, payload and sensor providers, and software vendors.

The Company delivers solutions

through wholesale distribution, direct sales, and direct-to-consumer retail channels.

Wholesale revenue represents sales through resellers

and channel partners serving enterprise, commercial, and governmental end customers.

Direct sales represent sales to enterprise, commercial,

and governmental customers that utilize drones as part of their operations.

Retail revenue represents sales to consumer end users, including

transactions at a retail showroom in South Florida and through an e-commerce platform.

Enterprise, commercial, and governmental customers

may also purchase through the e-commerce platform;

such transactions are classified as direct sales based on customer type.

The Company serves customers

across multiple end markets, including agriculture, construction, inspection, mining, insurance, security, energy and utilities, and public

The Company’s UAS offerings

generally fall into the following categories:

Hardware and Related Products.

The Company distributes UAS platforms, payloads, sensors, batteries, accessories, and related equipment from third-party manufacturers.

The Company assists customers in evaluating and selecting platforms and payload configurations suited to their operational requirements,

including inspection, mapping, surveying, public safety response, security monitoring, and other applications.

The Company’s ability

to offer and support specific platforms is subject to OEM product availability, dealer program terms, regulatory authorizations, and supply

chain conditions.

Revenue from hardware sales is generally recognized upon shipment or delivery.

Training and Program Enablement.

The Company provides training services designed to help customers establish and operate drone programs and navigate applicable regulatory

requirements.

Training may include platform operation, mission planning, payload use, safety procedures, and other operational topics.

The Company also provides program implementation support through operational best practices, documentation support, and workflow integration

Customer adoption may be affected by evolving regulatory requirements, including FAA operational rules, waivers, and related

Service, Repair, and Lifecycle Support.

The Company provides repair, maintenance, and lifecycle support services to maintain fleet readiness and reduce downtime.

Services include

diagnostics, repair, routine maintenance, and fleet sustainment programs.

The Company also supports manufacturer warranty processes and,

in certain cases, performs warranty services in accordance with OEM requirements.

Service revenue includes time-and-materials work, warranty-related

services, and service contracts.

Fleet Support, Software Enablement,

and Operational Services.

The Company supports enterprise and public sector customers with fleet management tools, software integration,

and operational workflow support.

The ability to deliver these services depends in part on access to third-party software platforms, OEM

system interfaces, and internal and third-party cloud-based systems.

Sales Support and Financing.

The Company provides procurement support and, in certain cases, financing arrangements to facilitate customer adoption.

Financing arrangements

involve third-party financing providers and are subject to applicable credit approvals, contractual terms, and other conditions.

Advanced Systems and Defense Division

XTI’s advanced systems and

defense division is focused on the design, development, and productization of unmanned platforms for defense and commercial customers,

drawing on the engineering expertise developed through the Company’s prior TriFan 600 program.

The division is building capabilities

in unmanned systems design, systems integration, and autonomous platform development, with an emphasis on defense procurement requirements

and domestic platform programs.

The division pursues opportunities through internal development, strategic partnerships, and co-development

arrangements.

The division has not yet generated

any revenues.

Additional information regarding this division’s organizational structure, products under development, and strategic

initiatives will be provided as those matters are finalized.

Domestic Manufacturing and Technology Division

XTI’s domestic manufacturing

and technology division is focused on developing and scaling U.S.-based production capabilities for unmanned systems and related technologies.

The division pursues manufacturing partnerships, joint ventures, co-development arrangements, and targeted investments in domestic production

The division has not yet generated any revenues.

Additional information regarding this division’s organizational structure

and strategic initiatives will be provided as those matters are finalized.

Research and Development

The Company’s research

and development activities are organized across its operating divisions and are focused on advancing unmanned systems capabilities, improving

operational performance, supporting regulatory compliance, and enabling future commercialization.

The Company expenses research and development

costs as incurred.

The Company’s research and development efforts require significant engineering, technical, and operational expertise

and may involve the use of third-party contractors, consultants, suppliers, and testing partners.

Research and Development Expenses

Research and development expenses

consist primarily of personnel-related costs, engineering and technical consulting fees, prototype and testing costs, software and tooling

expenses, and other costs incurred in connection with product and technology development activities.

R&D activity within the

XTI commercial drone solutions business is focused on solution enablement, including platform evaluation, integration support, and the

development of training and service capabilities that support enterprise and public sector customers.

R&D activity within the

Company’s advanced systems and defense division is focused on the design, development, and productization of unmanned platforms,

including systems integration, autonomy development, and the application of the Company’s aerospace engineering capabilities to defense

and commercial unmanned systems programs.

R&D activity within the

domestic manufacturing and technology division is focused on the development of production processes, manufacturing partnerships, and

technology integration capabilities that support scalable domestic UAS production.

XTI expects R&D expenses

to fluctuate from period to period based on the timing and scope of development activities, technical milestones, testing requirements,

and the progression of programs across our operating divisions.

UAS Operations — Development Activities

The XTI commercial drone solutions

business is primarily oriented toward distribution, integration, training, and lifecycle services.

It devotes resources to technical evaluation,

solution enablement, and service capability development in support of enterprise and public sector customer requirements.

These activities

generally include:

Platform and payload evaluation.

The Company assesses new UAS platforms, payloads, sensors, batteries, communications systems, and related equipment to determine suitability

for customer mission profiles and operational requirements.

Solution integration and enablement.

The Company supports customers in deploying UAS solutions that may involve interoperability between platforms, payloads, software applications,

fleet management systems, data processing tools, and customer workflows.

Training and program methodology

The Company continuously refines training content and program enablement procedures to reflect evolving customer needs,

safety practices, and regulatory requirements.

Service, repair, and sustainment

capability development.

The Company invests in improving diagnostics, repair procedures, maintenance workflows, parts logistics, and

technician training to expand service offerings and reduce customer downtime.

Operational procedures and compliance

XTI develops internal processes and operational playbooks designed to support enterprise deployment, including customer onboarding,

fleet sustainment programs, and compliance management support.

The Company’s development

efforts across all divisions are influenced by third-party product roadmaps, regulatory frameworks, certification requirements, and the

commercial practices of OEM partners and software providers.

Its ability to support certain solutions or expand related services may depend

on the availability of products and continued cooperation from third parties.

Intellectual Property

The Company’s primary

intellectual property assets prior to the Drone Nerds acquisition were developed through its former TriFan 600 manned VTOL aircraft program.

The engineering work, design concepts, and technical development undertaken through that program generated a body of intellectual property,

including proprietary aircraft design concepts, engineering work product, trade secrets, and other assets associated with VTOL and autonomous

systems development.

The Company seeks to protect these assets through a combination of patent filings, trade secret protections, confidentiality

agreements, and internal information security controls.

Patent protection, where pursued, may cover certain design elements, systems,

however, the scope and duration of such protection are subject to examination and applicable law, and there can be no assurance

that patent protection will be obtained or maintained.

XTI’s UAS distribution

and services business relies primarily on brand assets, customer relationships, proprietary training materials, operational processes,

repair methodologies, technical know-how, and service capabilities.

The Company protects these assets through confidentiality agreements,

intellectual property assignment provisions with employees and certain third parties, and contractual arrangements with suppliers and

Because the XTI UAS business

model is largely distribution, integration, training, and services-based, it does not rely primarily on owned patents for competitive

differentiation.

Instead, the Company’s competitive position depends on operational expertise, brand reputation, service infrastructure,

and relationships with OEMs and customers.

It also relies on intellectual property owned by third-party OEMs and software providers whose

products the Company distributes or supports, and the Company’s ability to sell and service such products is subject to the terms

of applicable distribution, dealer, and licensing agreements.

As described above under “Business Divisions — TriFan 600

Strategic Context and Organizational Evolution,” the Company paused the TriFan 600 program in 2026 and redirected the division’s

resources toward unmanned systems development.

The intellectual property developed through the TriFan 600 program remains an asset of

the Company and is being preserved.

The Company believes that certain underlying technologies — including work related to autonomous

flight systems, advanced propulsion, and airframe design — are applicable to the unmanned systems development work now underway

within the ADS division.

As of the date of this filing, all expenditures associated with the former aircraft division are directed toward

unmanned systems development and manufacturing programs.

Government Regulation

The XTI business is subject

to a broad range of federal, state, local, and, in certain cases, international laws and regulations that affect the products it distributes,

the services it provides, customer procurement decisions, and the ability of customers to deploy UAS platforms.

Key regulatory and compliance

areas include:

Federal Aviation Administration (“FAA”)

regulation of UAS operations.

UAS operations in the United States are subject to FAA rules governing operator certification, operational limitations,

waiver processes — including for beyond visual line of sight (“BVLOS”) operations — remote identification requirements,

and related safety and operational standards.

The ongoing evolution of FAA rulemaking, particularly with respect to BVLOS operations and

advanced air mobility, represents a material compliance consideration and may affect the timing and scope of broader enterprise and government

deployment as expanded operational authorizations enable such deployment.

In addition, if the Company were to resume development of the

TriFan 600 or other manned or semi-autonomous aircraft, such programs would be subject to additional FAA certification requirements, which

are complex, time-consuming, and uncertain.

Federal Communications Commission

(“FCC”) equipment authorization and communications requirements.

Certain UAS platforms, payloads, and related communications equipment

are subject to FCC equipment authorization and related technical requirements.

Recent FCC actions related to national security concerns

involving certain foreign-manufactured unmanned aircraft systems may affect the availability, eligibility, or timing of new product introductions

into the U.S.

In December 2025, the FCC added foreign-produced UAS and UAS critical components, on a going-forward basis, to the

Covered List, which restricts new equipment authorizations for those systems in the United States and may accelerate customer demand for

compliant domestic alternatives.

Government procurement, sourcing,

and supply chain security requirements.

Public sector customers may be subject to procurement restrictions, sourcing requirements,

and supply chain security rules that affect platform eligibility, vendor qualification, and procurement timing.

These requirements may

evolve based on national security, cybersecurity, and data protection considerations.

XTI’s OEM-agnostic, compliance-oriented distribution

model is designed to support customers in navigating these requirements.

Export controls, sanctions, and trade

Certain products, technologies, and customers may be subject to U.S.

export controls, sanctions, and related trade compliance

requirements, which may impose restrictions on sales activities, shipment destinations, end users, and product configurations.

Privacy, surveillance, and data regulation.

UAS deployments may involve the collection, processing, storage, or transmission of imagery and other data.

Customers and operators may

be subject to privacy, surveillance, and data protection laws and regulations that influence adoption, operational policies, and compliance

requirements.

The regulatory environment

applicable to UAS distribution, operations, data use, and unmanned systems development continues to evolve.

We monitor regulatory developments

and adjust our compliance processes, supplier relationships, and customer support practices as appropriate to align with applicable requirements

and procurement standards.

See Item 1C for information regarding the Company

cybersecurity risk management, strategy, and governance.

The Company’s employees

support UAS sales, marketing, repair and maintenance operations, training, customer support, and corporate functions, as well as engineering

and program development activities within the advanced systems and domestic manufacturing divisions.

The Company initiated a workforce transition reflecting two developments:

the 2025 acquisition of Drone Nerds, which added 82 employees to the Company’s headcount, and the 2026 strategic reorientation of

the former XTI Aircraft division toward unmanned systems development.

As part of that reorientation, the division’s workforce was

restructured and new leadership and technical personnel were hired with experience in unmanned platform development, defense programs,

and advanced manufacturing.

These changes were partially offset by the transfer of 22 employees in connection with the divestiture of

the Inpixon real-time location systems business.

As of March 31, 2026, the

Company had 105 employees, consisting of 96 full-time employees and 9 part-time employees.

None of the Company’s employees are represented

by a labor union or are party to a collective bargaining agreement.

The Company has not experienced any work stoppages and considers its

employee relations to be satisfactory.

Acquisition of Drone Nerds and Disposition of Inpixon Business

In November 2025, we completed the acquisition of Drone Nerds, LLC

and Anzu Robotics, LLC (“Anzu”).

Prior to the acquisition, Anzu was affiliated with Drone Nerds, LLC (then known as Drone

Nerds, Inc.) through common ownership and its financial results were included in the historical audited financial statements of the Drone

Nerds business.

The acquisition represented a strategic shift in our operating focus toward enterprise and public sector UAS solutions.

Prior to the acquisition,

Drone Nerds, LLC operated as a U.S.-based enterprise drone solutions provider offering hardware distribution, training, service and repair,

and fleet support across multiple commercial and public sector verticals.

Anzu operated within the broader Drone Nerds ecosystem and contributed

additional UAS platform and product capabilities.

The transaction was structured

as a purchase of the equity interests of Drone Nerds, LLC and Anzu.

Consideration consisted of a combination of cash, promissory notes

and equity, as further described in the notes to our consolidated financial statements included in this Annual Report.

The acquisition

was accounted for under the acquisition method of accounting in accordance with U.S.

GAAP, and the results of Drone Nerds have been included

in our consolidated financial statements from the acquisition date.

We pursued the acquisition

to establish a revenue-generating operating platform in the UAS market and diversify beyond development-stage aircraft activities.

Prior to the acquisition,

our primary focus was the Inpixon Business and the development of the TriFan 600 VTOL aircraft program.

Following the acquisition, our

ongoing operations are centered primarily on UAS solutions and services.

Drone Nerds maintains enterprise

sales capabilities, service and repair infrastructure, training programs, and logistics operations that enable end-to-end customer support.

We believe this infrastructure provides a foundation for expansion into additional verticals and public sector channels.

Following closing, Drone Nerds,

LLC and Anzu became our primary operating subsidiaries for UAS activities.

We retained key operational leadership and began aligning reporting

structures, corporate functions, and compliance processes across the combined organization.

The acquisition materially

changed the composition of our business and revenue base.

During December 2025, we actively explored strategic alternatives for the Inpixon

Business, including engaging with potential buyers and evaluating a potential sale of the business.

In February 2026, we completed the

disposition of the Inpixon Business through the sale of all of the shares of Inpixon GmbH to an unrelated party.

Our current operations

are focused on UAS solutions and aerospace development.

Corporate History and Information

XTI Aerospace, Inc.

corporation incorporated in 1999, formerly known as Inpixon, which completed a business combination with XTI Aircraft Company in March

The Company recently moved its principal executive offices, which are now located at:

15505 Wright Brothers Dr.

Addison, TX 75001

(800) 680-7412

XTI common stock trades on

the Nasdaq Capital Market under the symbol “XTIA.”

The Company conducts its operations primarily through its majority

owned subsidiary, XTI Drones Holdings, LLC, which owns Drone Nerds, LLC and Anzu Robotics, LLC and its wholly owned subsidiary, XTI Aircraft

The Company website address

is www.xtiaerospace.com.

The information contained on, or accessible through, the website is not incorporated by reference into this

Annual Report, and you should not rely on any such information in making any investment decision relating to the Company’s securities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business