XTI Aerospace, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial statements are unaudited and presented in thousands of dollars unless otherwise noted.
Business context and reporting period
XTI Aerospace completed its merger with XTI Aircraft Company on March 12, 2024 and changed its name from Inpixon. The merger is accounted for as a reverse acquisition: Legacy XTI is the accounting acquirer, and Legacy Inpixon’s results are included only from the merger closing through March 31 (19 days). The quarter therefore is not directly comparable with 2023, and the reported results do not represent a full quarter of the combined company. A 1-for-100 reverse stock split took effect on March 12.
The company develops the TriFan 600 VTOL aircraft and operates an Industrial IoT/real-time location systems business acquired in the merger. Commercial Aviation remains pre-revenue; Q1 revenue came from Industrial IoT.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $220 | $0 |
| Cost of revenue / gross profit | $79 / $141 | $0 / $0 |
| Operating expenses | $9,018 | $1,284 |
| Operating loss | $(8,877) | $(1,284) |
| Net loss attributable to XTI Aerospace stockholders | $(2,602) | $(1,565) |
| Net loss attributable to common stockholders | $(2,663) | $(1,565) |
| Basic and diluted loss per share | $(0.50) | $(0.41) |
| Cash used in operating activities | $(2,551) | $(457) |
Gross margin was approximately 64% on the reported $220 of revenue. Revenue comprised $53 of recurring software, $162 of hardware, and $5 of professional services. The company reported $1,801 of cash and a $5,099 working-capital deficit at March 31. Total assets were $30,782 and total liabilities were $17,117.
Reported debt was $838 short-term and $65 long-term at quarter-end. Most legacy convertible debt was converted to equity before the merger; the company also exchanged approximately $9.8 million of debt and accrued interest for Series 9 preferred stock. Operating cash outflow was partly offset by $2,958 of investing cash inflow, primarily cash acquired in the merger, and $1,390 of financing inflow. Cash rose from $5 at December 31 to $1,801 at March 31.
Material changes and unusual items
- Operating expenses increased by $7,734 year over year, primarily reflecting merger-related costs and noncash stock-based compensation. Merger-related transaction costs were $6,490 in Q1; the company reported approximately $13.8 million of merger transaction costs in total.
- Other income was $6,279, including a $12,882 gain from fair-value remeasurement of convertible notes, partly offset by a $6,732 inducement loss on debt conversions. These nonrecurring items materially affected the net loss.
- Stock-based compensation was $5,792, including compensation associated with merger-related professional fees and warrant vesting.
- Merger accounting added $12,398 of goodwill and $5,018 of net intangible assets. The purchase-price allocation remains preliminary.
- Q1 2024 includes only 19 days of Industrial IoT operations in the reported consolidated results. Unaudited pro forma results, assuming the merger occurred at the start of the comparative periods, show revenue of $727 and common-stockholder net loss of $16,530 for Q1 2024, versus revenue of $1,292 and net loss of $9,284 for Q1 2023.
Outlook, risks, and contingencies
Management plans to advance TriFan 600 supplier engagement and development design review. Critical design review and construction and testing of full-scale flight-test aircraft depend on raising additional financing. The company does not expect significant Commercial Aviation revenue before aircraft design, development, certification, and manufacturing are completed. It expects research and development and general and administrative expenses to increase as it pursues development and commercialization. No specific revenue, profitability, or certification guidance is provided.
Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, operating cash use, a $5.1 million working-capital deficit, and reliance on additional debt or equity financing and operating efficiencies. At March 31, cash was $1.8 million. Approximately $1.35 million of customer deposits are refundable before definitive purchase agreements; customers are not then obligated to buy aircraft, and refunds could strain liquidity.
Xeriant, Inc. alleges contract breaches, fraud, and other claims and seeks damages exceeding $500 million, injunctive relief, and royalties. The case is at an early stage; the company denies wrongdoing and says it cannot estimate the likelihood or magnitude of a potential loss. The company also disclosed substantial post-merger commitments to former executives, including consulting fees and payments that may total $6 million to the former CEO, payable in cash or shares at the company’s discretion.
Disclosure controls and procedures were deemed ineffective as of March 31, 2024, in part because Legacy XTI lacked public-company financial reporting controls before the merger; integration is underway. Nasdaq listing compliance issues were reported cured by May 2024, including independent-director and audit-committee compliance. Series 9 preferred stock carries a 10% annual compounded return, in addition to specified future dividends, and can create further cash or dilution obligations.
Important facts for investors to verify
- Whether the company can obtain sufficient financing, manage near-term liquidity, and address the disclosed going-concern uncertainty.
- Progress and funding requirements for TriFan 600 development, full-scale test aircraft, FAA certification, and delivery timelines.
- Terms, refundability, and conversion status of aircraft customer deposits and the conditional or nonbinding nature of reported aircraft orders.
- Final merger purchase-price allocation, recurring operating costs, and the company’s results after a full quarter of combined operations.
- Developments in the Xeriant litigation and the potential financial impact of executive compensation, preferred-stock returns, debt, and other commitments.
- Remediation of ineffective disclosure controls and the company’s continued compliance with Nasdaq listing standards.