Note 1 - Description of Business and Organization

The following describes the Company’s business and organizational structure:

Business

XTI Aerospace, Inc. (the “Company”) is a U.S.-based aerospace company focused on unmanned aircraft systems (“UAS”) and related services. The Company provides UAS solutions through a combination of product distribution and service offerings, including the sale and support of UAS platforms, payloads, sensors, batteries, accessories and related equipment, as well as operator training, program enablement, repair and maintenance, and other fleet lifecycle support services for enterprise, public safety, government, and defense-related customers. The Company is also starting in 2026 the design and development of unmanned platforms for defense and commercial applications.

Organization

On March 12, 2024 (the “Closing Date”), the Company, formerly known as Inpixon (“Legacy Inpixon”), completed a reverse triangular merger with XTI Aircraft Company, a Delaware corporation (“Legacy XTI”), pursuant to the Agreement and Plan of Merger dated July 24, 2023, as amended (the “XTI Merger”). In connection with the transaction, Legacy XTI became a wholly owned subsidiary of the Company, and the Company changed its name to “XTI Aerospace, Inc.” The Company’s common stock began trading on the Nasdaq Capital Market under the ticker symbol “XTIA” on March 13, 2024. The XTI Merger was accounted for as a reverse acquisition, with Legacy XTI treated as the accounting acquirer and Legacy Inpixon treated as the accounting acquiree. Accordingly, the consolidated financial statements represent a continuation of the financial statements of Legacy XTI, and include the results of operations of Legacy Inpixon from the Closing Date.

In November 2025, the Company completed the acquisition of Drone Nerds, LLC and Anzu Robotics, LLC (collectively, “Drone Nerds”) through XTI Drones Holdings, LLC, a Texas limited liability company (“XTI Drones Holdings”). The Company holds an 83.403% controlling equity interest in XTI Drones Holdings through its ownership of Class A Units, and the remaining 16.597% equity interest is held by other Class B unitholders. The results of Drone Nerds have been included in the Company’s consolidated financial statements from November 10, 2025, the acquisition date, and the ownership interest not held by the Company is reflected as noncontrolling interest. Drone Nerds currently represents the Company’s primary UAS solutions and services operations.

During December 2025, the Company committed to a plan to dispose of its historical Industrial IoT / real-time location systems (“RTLS”) operations (the “Inpixon Business”) and classified the business as held for sale. The disposition of the Inpixon Business was completed on February 3, 2026. The Inpixon Business historically comprised the Company’s Industrial IoT operations, which previously represented the Company’s Industrial IoT reportable segment. The results of the Inpixon Business have been presented as discontinued operations in the accompanying consolidated financial statements for all periods presented. Unless otherwise indicated, the information included in the accompanying notes to the consolidated financial statements relates to the Company’s continuing operations. See Note 19 for additional information regarding discontinued operations.

Reverse Stock Splits

On January 10, 2025, the Company effected a 1-for-250 reverse stock split of its outstanding common stock. Prior to that, on March 12, 2024, the Company effected a 1-for-100 reverse stock split of its outstanding common stock. The par value of the common stock was not changed as a result of either reverse stock split.

All share and per share amounts presented in these consolidated financial statements have been retroactively adjusted to reflect the reverse stock splits.