XTI Aerospace, Inc.
For the period ended Dec 31, 2025. Filed Apr 15, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Apr 15, 2026
XTIA$0.89+6.0%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-04-15.
0001213900-25-032213
Item 1A. RISK FACTORSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-04-15.
0001213900-26-043785
Item 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 185 previous paragraphs and 306 current paragraphs.
45 unchanged; 56 reworded; 197 added; 84 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 98 previous and 90 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (197)
Current report
Our ability to continue funding our operations and execute our long-term development strategy depends on our ability to maintain sufficient liquidity and obtain additional capital over time.
Current report
Our operations have historically generated net losses and negative operating cash flows, and we have incurred significant cumulative losses since inception. Although we believe our current liquidity is sufficient to fund operations for at least the next twelve months, we will require additional capital over time to support the growth of our UAS distribution and services businesses via acquisitions and, if we decide to resume the TriFan 600 program, the continued development, certification and commercialization of the TriFan 600 aircraft. Because the TriFan 600 program is currently paused, our near-term capital needs are primarily driven by our UAS growth plan and the development of our unmanned systems and domestic manufacturing initiatives.
Current report
Our ability to obtain additional financing will depend on many factors, including market conditions, investor demand, our operating performance, and broader economic conditions. If we are unable to obtain additional capital when needed or on acceptable terms, we may be required to delay or scale back certain development programs, reduce operating expenditures, or modify our business strategy, any of which could materially adversely affect our business, financial condition and results of operations.
Current report
Our UAS business operates in a rapidly evolving market and is subject to risks related to changes in technology, customer demand, regulatory developments and procurement requirements.
Current report
Drone Nerds’ drone, camera and sensor technologies and related software, training, operational support and repair services are sold in new and rapidly evolving markets. The commercial unmanned aerial vehicles (“UAV”) industry is in the early stages of customer adoption, and the FAA’s regulations relating to the integration of commercial drones into the U.S. National Airspace System continue to evolve. Accordingly, our UAS business and future prospects may be difficult to evaluate. We cannot accurately predict the extent to which demand for drone systems and solutions will increase, if at all.
Current report
The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact our ability to:
Current report
Our UAS operations are subject to evolving federal, state, local and international regulatory requirements, and changes in such regulations or our inability to comply with them could adversely affect our business.
Current report
The distribution, sale, integration and operation of UAS are subject to extensive and evolving regulation by the FAA, the FCC, the Department of Commerce, the Department of War and other federal, state, local and foreign authorities. These regulations govern, among other things, airspace usage, remote identification, beyond visual line of sight (“BVLOS”) operations, operator certification, product authorizations, communications spectrum, importation, cybersecurity requirements and procurement eligibility for government customers. These regulations may require us to obtain, maintain and periodically renew certifications, waivers or operational authorizations in order to conduct certain types of drone operations, including operations beyond visual line of sight, nighttime operations, flights over people or operations in controlled or restricted airspace. If we are unable to obtain, maintain or renew required approvals or authorizations on commercially reasonable terms or within required timeframes, our ability to expand our services, enter new markets or maintain existing operations could be adversely affected.
Current report
Regulatory requirements applicable to UAS technology and operations continue to evolve and may become more restrictive. For example, new rules or interpretations relating to airspace access, operational waivers, remote ID compliance, data security, country-of-origin restrictions, or government procurement eligibility could limit the ability of our customers to deploy certain products or could restrict the products we are permitted to sell. In addition, certain customers may require additional certifications, security clearances or compliance with emerging federal or state procurement restrictions before purchasing UAS products or services.
Current report
If we or our suppliers are unable to obtain, maintain or renew required licenses, certifications or authorizations, or if regulatory changes restrict the use, sale or importation of certain drone platforms, components or related technologies, demand for our products and services could decline. Increased regulatory scrutiny, enforcement actions, or delays in regulatory approvals could also increase our compliance costs, disrupt our operations or adversely affect our reputation.
Current report
Any material changes in the regulatory framework governing UAS operations, or our failure to comply with applicable laws and regulations, could have a material adverse effect on our business, financial condition and results of operations.
Current report
Our UAS business depends on relationships with key suppliers and manufacturers, and adverse regulatory developments or other disruptions affecting those suppliers could materially adversely affect our business, financial condition and results of operations.
Current report
Drone Nerds maintains relationships with various global suppliers of drones and related electronics. For the year ended December 31, 2025, purchases from its top three suppliers represented approximately 49%, 13% and 6% of total purchases, respectively. If any of these suppliers were to reduce or terminate their relationship with us, fail to supply products on commercially reasonable terms, or experience operational or regulatory disruptions, our ability to source products could be materially adversely affected.
Current report
Drone Nerds relies on SZ DJI Technology Co, Ltd. and affiliates (“DJI”) for a significant portion of its drone sales. In September 2025, Drone Nerds, LLC entered into a one-year agreement with DJI to serve as an official non-exclusive dealer of its products in the United States. DJI has been included on certain U.S. government watchlists relating to national security and data concerns.
Current report
In addition, the FCC and other U.S. government agencies have taken actions, including actions relating to the FCC’s Covered List and national security restrictions affecting certain foreign-manufactured unmanned aircraft systems and related components, that may affect the authorization, procurement, or use of certain drone platforms in the United States. These actions may limit manufacturers’ ability to obtain FCC equipment authorization for new products or product modifications, which could affect the ability to market or sell certain drone platforms or components in the United States.
Current report
Although existing FCC equipment authorizations for previously approved products generally remain valid, federal agencies may impose procurement restrictions, usage limitations, or other requirements affecting the deployment of such products. Regulatory actions, procurement bans, import restrictions, or heightened export-control or data-security scrutiny could reduce customer demand, limit participation in government-funded projects, or otherwise adversely affect sales of DJI-based systems.
Current report
If regulatory developments restrict DJI’s ability to sell products in the United States or limit customer use of such products or our agreement with DJI expires and is not renewed, we may be required to seek alternative suppliers, renegotiate supplier agreements, or incur transition costs. Our ability to diversify our supplier base may be limited, and there can be no assurance that alternative suppliers would be available on comparable terms, if at all. Any significant disruption in supply, reduction in product availability, or decline in customer demand could materially and adversely affect our business, financial condition and results of operations.
Current report
Our UAS operations also depend on the continued availability of critical components such as batteries, sensors, communications equipment, software platforms and replacement parts supplied by third-party manufacturers and vendors. Shortages of these components, quality control issues, transportation delays, trade restrictions, tariffs, geopolitical developments or financial distress affecting key suppliers could delay service delivery, increase operating costs or reduce operational capacity, which could materially adversely affect our business, financial condition and results of operations.
Current report
Our UAS operations involve assembly, configuration, integration, repair and service activities that expose us to operational, quality and execution risks that could adversely affect our business.
Current report
Our UAS business includes activities such as assembling, configuring, integrating, testing, repairing and maintaining drone systems and related components for customers. These operational activities involve risks that differ from those associated with simple product distribution, including the risk of technician errors, quality control failures, equipment malfunctions, improper installation, delays in service delivery, and failures to meet customer specifications or performance expectations.
Current report
As our UAS operations grow, we may face challenges in scaling our service infrastructure, training and retaining qualified personnel, maintaining consistent quality standards, and managing workflow and inventory across multiple locations. Any operational or service failures could result in product returns, warranty claims, customer disputes, contract penalties, reputational harm, increased operating costs or reduced margins. In addition, defects or failures in products that we assemble, configure or service could expose us to liability claims or regulatory scrutiny.
Current report
If we are unable to manage these operational risks effectively, our business, financial condition and results of operations could be materially adversely affected.
Current report
We may experience losses or reduced margins if we are unable to accurately forecast demand for UAS products or manage our inventory effectively.
Current report
Our business requires us to maintain inventory of drone platforms, components and related equipment in advance of customer demand. Demand for UAS products can be affected by regulatory changes, technological developments, seasonal purchasing patterns, government procurement cycles and macroeconomic conditions. If we overestimate demand, we may hold excess or obsolete inventory, incur storage and carrying costs, or be required to sell products at reduced prices. Conversely, if we underestimate demand, we may be unable to fulfill customer orders in a timely manner, resulting in lost sales and reduced customer satisfaction. Any significant mismatch between inventory levels and customer demand could materially adversely affect our gross margins, operating results and cash flows.
Current report
Our UAS distribution and services business depends on third-party manufacturers, software platforms and OEM policies, and adverse changes in those relationships could materially adversely affect our business, financial condition and results of operations.
Current report
A significant portion of our UAS business involves the distribution, integration, servicing and support of products manufactured by third-party drone and sensor OEMs. Our ability to sell, service and support these products depends on maintaining strong commercial relationships with such manufacturers and complying with their distribution, pricing, branding, warranty and technical requirements.
Current report
Many OEMs control critical elements of the ecosystem in which their products operate, including firmware updates, cloud-based management platforms, software development kits (SDKs), application programming interfaces (APIs), parts availability, repair authorizations and technical documentation. Changes to these platforms, pricing structures, reseller programs, minimum purchase requirements, territory allocations, certification requirements or other OEM policies could:
Current report
In addition, some OEMs may choose to sell directly to end customers, expand their own direct sales channels, consolidate distribution networks or favor larger or strategically aligned distributors. If any key OEM were to reduce our authorized reseller status, impose less favorable commercial terms, limit product allocations, or terminate our relationship, we may be unable to replace such products on comparable terms, or at all.
Current report
Our dependence on third-party platforms and OEM-controlled ecosystems reduces our control over product roadmaps, pricing, support policies and long-term availability. Any material disruption or deterioration in these relationships could have a material adverse effect on our UAS business, financial condition and results of operations.
Current report
We may be unable to effectively manage the growth and operational complexity of our expanding UAS distribution and services business.
Current report
Our recent growth and the expansion of our UAS operations have increased the complexity of our business and placed significant demands on our management, personnel, operational systems and infrastructure. Continued growth may require us to expand our workforce, warehouse capacity, service capabilities, information technology systems and internal controls. If we are unable to successfully manage these operational demands, maintain service quality, or integrate new personnel and processes effectively, our ability to fulfill customer orders, provide timely support services and maintain customer satisfaction could be adversely affected. Any failure to manage our growth effectively could result in operational inefficiencies, increased costs, service disruptions or reputational harm, which could materially adversely affect our business, financial condition and results of operations.
Current report
Our UAS business requires us to maintain inventory, and we may incur losses due to excess inventory, obsolescence or changes in market demand.
Current report
Our UAS distribution and services business requires us to purchase, hold and manage inventory of drone platforms, components, accessories, replacement parts and related products. We must forecast customer demand, regulatory developments and technology trends when making inventory purchasing decisions. Because the UAS market is characterized by rapid technological change, evolving regulatory requirements and changing customer preferences, products we hold in inventory may become obsolete, subject to new restrictions, or less desirable before they are sold.
Current report
In addition, adverse regulatory developments, including changes to U.S. import restrictions, sanctions, FCC authorization requirements, NDAA compliance rules or other government procurement standards, could limit our ability to sell certain products we have already purchased. If we are required to discontinue or restrict sales of certain products, we may be required to write down or dispose of affected inventory at a loss.
Current report
We may also experience excess inventory levels if customer demand declines, orders are cancelled or delayed, suppliers introduce newer models, or macroeconomic conditions reduce purchasing activity. Any significant write-downs for excess or obsolete inventory would adversely affect our gross margins, operating results and financial condition.
Current report
Furthermore, if we are unable to accurately forecast demand or manage inventory effectively, we may experience shortages of high-demand products, which could result in lost sales and damage to customer relationships.
Current report
We may incur significant costs to honor warranties, provide service, repairs, maintenance and technical support for UAS products we distribute or service, and failures in these activities could adversely affect our business, financial condition and results of operations.
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Removed paragraphs (84)
Previous report
We have a limited operating history and have not yet manufactured any non-prototype aircraft, delivered any aircraft to customers or generated any revenues from our aircraft business, and we may never develop or manufacture any VTOL aircraft according to our current development schedule, or at all.
Previous report
We have a limited operating history in the VTOL aircraft industry. Our primary VTOL aircraft product is the TriFan 600 airplane, which is currently in the developmental stage. If we are successful in commercially producing the TriFan 600 according to our current development schedule, we do not expect to be able to obtain approval from the FAA and regulatory bodies in other countries, and commence deliveries until 2030 at the earliest, if at all. We have no experience as an organization in high volume manufacturing of the TriFan 600 or any other type of aircraft. We cannot assure you that we or our partners will be able to develop efficient, automated, cost-efficient manufacturing capabilities and processes and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market our aircraft. You should consider our business and prospects in light of the risks and significant challenges we face as a new entrant into our industry, including, among other things, with respect to our ability to:
Previous report
If we fail to adequately address any or all of these risks and challenges, our business, financial condition and results of operations may be materially and adversely affected. There is no assurance that we will ever be profitable or generate sufficient revenue to pay dividends to the holders of our common stock. We do not believe we will be able to generate revenues from the sale of aircraft without successfully securing FAA certification of the TriFan 600 airplane, which involves substantial risk. As a result, we are dependent upon raising sufficient financing to fund the Company until the TriFan 600’s first flight, including building the first test airplane. If planned operating levels are changed, higher operating costs encountered, lower sales revenue received, more time is needed to implement the plan, or less funding is received from customer deposits or sales, more investor funds than currently anticipated may be required. Additional difficulties may be encountered prior to FAA certification, such as unanticipated problems relating to development, testing, and initial and continuing regulatory compliance, vendor manufacturing costs, production and assembly, and the competitive and regulatory environments in which we intend to operate. If additional capital is not available when required, or is not available on acceptable terms, we may be forced to modify or abandon our business plan.
Previous report
We will require FAA certification, and a delay in receiving such certification could adversely affect our prospects, business, financial condition and results of operations.
Previous report
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. Some or most customers might not transition to non-refundable purchase contracts until prior to aircraft delivery, if at all. Aircraft customers might respond to weak economic conditions or competitive alternatives in the market by canceling orders, resulting in lower demand for our TriFan 600 airplane and other materials, such as parts, services, and training, from which we expect to generate additional revenue. Customers’ request for a return of their refundable deposits could have a material adverse effect on our financial results and/or liquidity, including, but not limited to, the possibility that we may be financially unable to return such deposits.
Previous report
Our management is evaluating options and strategic transactions and continuing to market and promote our new products and technologies, however, there is no guarantee that these efforts will be successful or that we will be able to achieve or sustain profitability. Even if we are able to successfully develop and sell our aircraft, there can be no assurance that the aircraft will be commercially successful and achieve or sustain profitability. We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, certify and assemble our aircraft, deploy our facilities, build up inventories of parts and components for our aircraft, increase our sales and marketing activities, develop our manufacturing infrastructure and increase our general and administrative functions to support our growing operations. These efforts may not result in the Company reaching profitability, which would further increase our losses. We have funded our operations primarily with proceeds from public and private offerings of our common stock and secured and unsecured debt instruments. Our history of operating losses and cash uses, our projections of the level of cash that will be required for our operations to reach profitability, may impair our ability to raise capital on terms that we consider reasonable and at the levels that we will require over the coming months.
Previous report
To the extent that we raise additional capital by issuing equity securities, such an issuance may cause significant dilution to our stockholders’ ownership and the terms of any new equity securities may have preferences over our common stock. Any debt financing that we enter into may involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem its stock or make investments. In addition, if we raise additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of our technologies and proprietary rights, or grant licenses on terms that are not favorable to us. We have issued, and may in the future issue, incentive awards under our equity incentive plans, which may have additional dilutive effects. We may also be required to recognize non-cash expenses in connection with certain securities we may issue in the future such as convertible notes and warrants, which would adversely impact our financial condition and results of operations.
Previous report
Our ability to obtain needed financing may be impaired by factors, including the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are neither cash flow positive nor profitable, which could affect the availability or cost of future financing. We cannot provide any assurances that we will be able to secure additional funding from public or private offerings or debt financings on terms acceptable to us, if at all. If the amount of capital we are able to raise from financing activities, together with our limited revenues from operations, is not sufficient to satisfy our capital needs, we may need to reduce our operations by, for example, selling certain assets or business segments.
Previous report
As a result of our failure to timely file a Current Report on Form 8-K, we are currently ineligible to use Form S-3 until August 2025, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
Previous report
As a result of our failure to timely file a Current Report on Form 8-K, we are currently ineligible to use Form S-3 until August 2025. Our inability to use Form S-3 may significantly impair our ability to raise necessary capital to fund our operations and execute our strategy. If we seek to access the capital markets through a registered offering during the period of time that we are unable to use Form S-3, we may be required to publicly disclose the proposed offering and the material terms thereof before the offering commences, we may experience delays in the offering process due to SEC review of a Form S-1 registration statement and we may incur increased offering and transaction costs and other considerations. Disclosing a public offering prior to the formal commencement of an offering may result in downward pressure on our stock price. If we are unable to raise capital through a registered offering, we would be required to conduct our equity financing transactions on a private placement basis, which may be subject to pricing, size and other limitations imposed under the Nasdaq rules, or seek other sources of capital. The foregoing limitations on our financing approaches could prevent us from pursuing transactions or implementing business strategies that would be beneficial to our business.
Previous report
Operating aircraft carries a degree of inherent risk. Accidents or incidents involving VTOL aircraft, us or our competitors could have a material adverse effect on our business, financial condition and results of operations.
Previous report
Test flying a prototype aircraft is inherently risky, and accidents or incidents involving our aircraft are possible. Any such occurrence would negatively impact our development, testing and certification efforts, and could result in re-design, certification delay and/or postponements or delays to the sales of our aircraft.
Previous report
The operation of an aircraft is subject to various risks, and we expect demand for our aircraft to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft. Such accidents or incidents could also have a material impact on our ability to obtain certification from the FAA and/or international regulators for our aircraft, or to obtain such certification in a timely manner. Such events could impact confidence in a particular aircraft type or the air transportation services industry as a whole, particularly if such accidents or disasters were due to a safety fault. We believe that regulators and the general public are still forming opinions about the safety and utility of various new types of VTOL aircraft, particularly “air taxis”, which are also known as “eVTOLs.” An accident or incident involving either our VTOL aircraft or an eVTOL aircraft during these early stages of opinion formation could have a disproportionate impact on the longer-term view of the advanced VTOL aircraft market generally.
Previous report
There may be heightened public skepticism of new types of VTOL aircraft and its adopters. In particular, there could be negative public perception surrounding air taxis, including the overall safety and the potential for injuries or death occurring as a result of accidents involving them, regardless of whether any such safety incidents involve our aircraft. Any of the foregoing risks and challenges could adversely affect the combined company’s prospects, business, financial condition and results of operations.
Previous report
We are at risk of adverse publicity stemming from any public incident involving our company, our people, our brand or other companies in our industry. Such an incident could involve the actual or alleged behavior of any of our employees or third-party contractors. Further, if our personnel, our TriFan 600 airplane or other types of aircraft are involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident. In addition, any such incident, accident, catastrophe or action involving our employees, our TriFan 600 airplane or other types of aircraft could create an adverse public perception, which could harm our reputation, result in passengers being reluctant to use our services and adversely impact our business, results of operations and financial condition.
Previous report
Additionally, the RTLS industry is developing rapidly and related technology trends are constantly evolving. In this environment, we face, among other things, significant price competition from our competitors. As a result, we may be forced to reduce the prices of the RTLS products and services we sell in response to offerings made by our competitors and may not be able to maintain the level of bargaining power that we have enjoyed in the past when negotiating the prices of our products and services. If we are not able to maintain favorable pricing for our RTLS products and services, our results of operations could be adversely affected.
Previous report
The market for a civilian long-range fixed-wing VTOL airplane is new and untested. If such market does not respond at the level we expect or if it fails to grow as large as we expect, our business, financial condition and results of operations could be harmed.
Previous report
The market for a civilian long-range fixed-wing VTOL airplane is completely new and untested. Our success in this market is dependent upon our ability to effectively market and sell travel and other applications by the TriFan 600 as a substitute for conventional methods of air transportation (i.e., helicopters and/or light and mid-size business aircraft) and the effectiveness of our other marketing and growth efforts. We have projected the market for the TriFan 600 based upon a variety of internal and external market data. The estimates involve assumptions, which may not be realized in fact. There can be no assurance that our estimates for the number of TriFan 600 airplane that may be sold in the market will be as anticipated. If the public does not respond as expected as a result of concerns regarding safety, affordability or for other reasons, then the market for our offerings may not develop, may develop more slowly than we expect or may not achieve the growth potential we expect, any of which could harm our business, financial condition and results of operations.
Previous report
Developing new products and technologies entails significant risks and uncertainties.
Previous report
Delays or cost overruns in the development or certification of the TriFan 600 and failure of the product to meet its performance estimates is likely to affect our financial performance. Delays and increased costs may be caused by unanticipated technological hurdles, changes to design or failure on the part of our suppliers to deliver components as agreed. This may further delay the development and/or certification of the TriFan 600.
Previous report
Additionally, the TriFan 600 may not perform at the level we expect or may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair. It is not possible to fully replicate every operating condition and validate the long-term durability of every aspect of our aircraft in testing prior to its use in service. In some instances, we may need to continue to rely upon projections and models to validate the projected performance of our aircraft over their lifetime. Therefore, similar to most aerospace products, there is a risk that our aircraft may suffer unforeseen faults, defect or other issues in service. Such faults, defects and other issues may require significant additional research and development to rectify and could involve suspension of operation of our aircraft until any such defects can be cured. There can be no assurance that such research and development efforts would result in viable products or cure any such defects. Obtaining the necessary data and results may take longer than planned or may not be obtained at all. Any such delays or setbacks could have a material adverse effect on our reputation and our ability to achieve our projected timelines and financial goals.
Previous report
In order to develop and manufacture our aircraft, we must be able to obtain and maintain adequate facilities and infrastructure. We may be unsuccessful in obtaining, developing and/or maintaining these facilities in a commercially viable manner. Even if we are able to begin assembly operations in these facilities, maintenance of these facilities will require considerable capital expenditure as we expand operations. We cannot provide any assurance that we will be successful in obtaining and maintaining adequate facilities and infrastructure, and any failure to do so may result in our inability to develop and manufacture our aircraft as expected or on the timelines projected, which would adversely affect our business, financial condition and results of operations.
Previous report
Moreover, the TriFan 600, when produced, is anticipated to require regular maintenance and support. We are still developing our understanding of the long-term maintenance profile of the airplane, and if useful lifetimes are shorter than expected, this may lead to greater maintenance costs than previously anticipated. If the TriFan 600 and related equipment require maintenance more frequently than we plan for or at costs that exceed our estimates, that would have an impact on the sales of our aircraft and have a material adverse effect on our business, financial condition and results of operations.
Previous report
There may be a shortage of pilots and mechanics who meet the training standards required, which could reduce our ability to sell our aircraft at scale and on our expected timelines.
Previous report
There is a shortage of pilots that is expected to exacerbate over time as more pilots in the industry approach mandatory retirement age. Similarly, trained and qualified aircraft and aviation mechanics are also in short supply. If these shortages continue, the aviation industry as a whole and our business may face challenges.
Previous report
In addition, if we experience a significant increase in demand, or need to replace our existing suppliers, there can be no assurance that additional suppliers of component parts will be available when required on terms that are acceptable to us, or at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. Further, if we are unable to manage successfully our relationships with all of our suppliers and partners, the quality and availability of our aircraft may be harmed. Our suppliers or partners could, under some circumstances, decline to accept new purchase orders from, or otherwise reduce their business with, us. Any disruptions in the supply of components from our suppliers and partners could lead to delays in aircraft production, which would materially adversely affect our business, financial condition and operating results.
Previous report
Further, if any conflicts arise between our suppliers or partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our business strategies, which could impact our projected production timelines and number of aircraft produced. Our suppliers or partners may also develop, either alone or with others, products in related fields that are competitive with our products as a result of any conflicts or disagreements. Any disagreements or conflicts with our suppliers or partners could have an adverse effect on our reputation, which could also negatively impact our ability to source new suppliers or partners.
Previous report
Any changes in business conditions, wars, governmental changes, political intervention and other factors beyond our control or which we do not presently anticipate, could also affect our partners’ and suppliers’ abilities to deliver components to us on a timely basis, which could have a material adverse effect on our overall timelines to produce our aircraft. We do not control our suppliers or partners or such parties’ labor and other legal compliance practices, including their environmental, health and safety practices. If our current suppliers or partners, or any other suppliers or partners which we may use in the future, violates any specific laws or regulations, we may be subjected to extra duties, significant monetary penalties, adverse publicity, the seizure and forfeiture of products that we are attempting to import or the loss of our import privileges. The effects of these factors could render the conduct of our business in a particular country undesirable or impractical and have a negative impact on our business, financial condition and results of operations.
Previous report
Market and regulatory trends to reduce climate change may not evolve in the direction and within the timing expected, which could have a negative impact in our business plan.
Previous report
A number of governments globally have introduced or are moving to introduce climate change legislation and treaties at the international, national, state/provincial and local levels. Regulation relating to emission levels and energy efficiency is becoming more stringent and is gaining more widespread market approval, as consumers expect companies to play a role in addressing climate change. Our business plan is predicated in part on the idea that market and regulatory trends favoring such “clean” energy and addressing climate change will continue to evolve in our favor. However, any change or reversal in such market and regulatory trends, such as less focus on climate-friendly solutions or less stringent legislation with respect to emissions, could result in lower demand for our aircraft and have an adverse effect on our business.
Previous report
Although we maintain insurance and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance or the warranties, performance guarantees or risk sharing arrangements may not be adequate to cover potential claims, lost revenue, increased expenses or liquidated damages payments that may be required in the future. Moreover, there can be no assurance that present levels of coverage will be available in the future at reasonable cost. We also expect our insurance needs and costs to increase as we build production facilities, manufacture aircraft, establish commercial operations and expand into new markets.
Previous report
We have historically had a strategic acquisition strategy and since 2014 we completed several strategic transactions and spin-offs. Our RTLS business has developed through multiple acquisition transactions. In August 2018, we completed the spin-off of our VAR business, which included our legacy value added reseller business, and in 2019 we completed several other acquisition transactions to expand our product portfolio. In 2020, we acquired the Nanotron business, an exclusive license for the distribution and marketing of statistical analytics and visualization software solutions for engineering and sciences (SAVES) expanding our operations in the United Kingdom and Germany. In 2021, we acquired 100% of the outstanding capital stock of IntraNav GmbH, an industrial IoT (IIoT), real-time location system (RTLS), and sensor data services provider and 100% of the outstanding capital stock of Design Reactor, Inc which operated an enterprise level employee experience app. In 2023, we completed the spin-off of this enterprise apps business. In December 2023, we transferred the UK division of our SAVES business to Damon Motors Inc. (then known as Grafiti Holding Inc.) (“Damon Motors”) in connection with the spin-off and distribution of all of the shares of Damon to our shareholders upon the effectiveness, in November 2024, of Damon’s registration statement related to the spin-off distribution. In February 2024, we divested the remainder of the SAVES and Shoom business in a stock purchase transaction. Our limited operating history after such acquisitions and divestitures makes it difficult for potential investors to evaluate our business or prospective operations or the merits of an investment in our securities.
Previous report
Any future disposition of assets and business could have material and adverse effect on business, financial conditions, and operations, if not consummated in a timely manner. Such transactions may expose us to unknown or unforeseeable challenges resulting in disruption of business operations, loss of key personnel and ongoing tax benefits treatment, failure to obtain necessary statutory and regulatory approvals, provide ongoing indemnity, and compliance with post-closing obligations, which may affect or prevent us from consummating the transactions, and have a material and adverse effect on our business, financial conditions, and operations.
Previous report
With respect to acquisitions, we are subject to the risks inherent in the financing, expenditures, complications and delays characteristic of a newly combined business, including, but not limited to:
Previous report
Accordingly, our business and success faces risks from uncertainties inherent to developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
Previous report
Even if we are able to successfully operate the acquired businesses, we may not be able to realize the revenue and other synergies and growth that we anticipated from these acquisitions in the time frame that we currently expect, and the costs of achieving these benefits may be higher than what we currently expect, because of a number of risks, including, but not limited to:
Previous report
As a result of these risks, the acquisitions and integration may not contribute to our earnings as expected, we may not achieve expected revenue synergies or our return on invested capital targets when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of the acquisitions.
Showing the first 40 of 84 passages. Open the source sections for the rest.
Reworded paragraphs (56)
Previous wording
We are subject to various risks and uncertainties that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves a high degree of risk. In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this report.
Current wording
We are subject to various risks and uncertainties that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock and other securities is speculative and involves a high degree of risk. In evaluating an investment in our securities, you should carefully consider the risks described below, together with the other information included in this Annual Report.
Previous wording
If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize, that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and investors in our common stock may lose all or part of their investment in our shares. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
Current wording
If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize, that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and investors in our securities may lose all or part of their investment. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. Moreover, these disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Previous wording
The growth of our RTLS business is dependent on increasing sales to our existing customers and obtaining new customers, which, if unsuccessful, could limit our financial performance.
Current wording
The growth of our UAS business depends on increasing sales to existing customers and obtaining new customers, which, if unsuccessful, could limit our financial performance.
Previous wording
Our future success depends, in part, on our ability to increase revenues from existing RTLS customers by identifying additional opportunities to sell more of our RTLS products and services and on our ability to obtain new RTLS customers. The rate at which our customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including the perceived need for indoor mapping products and services, our ability to offer high quality products and services at competitive prices, meeting customers’ needs and expectations, the strength of our competitors, the capabilities of our sales and marketing departments and general economic conditions. If we are not able to continue to increase sales of our RTLS products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues as well.
Current wording
Our future success depends, in part, on our ability to increase revenues from existing customers by identifying additional opportunities to sell more of our UAS products and services, including drone platforms, cameras, sensors, software, training, repair and operational support services, and on our ability to obtain new customers. The rate at which customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including customer demand for UAS solutions, our ability to offer high-quality products and services at competitive prices, meeting customer needs and expectations, the strength of our competitors, the capabilities of our sales and marketing efforts, the availability of drone products from key suppliers, regulatory developments and general economic conditions.
Previous wording
Our RTLS business currently has a limited number of customers, the importance of which may vary dramatically from year to year, and a loss of one or more of these key customers may adversely affect our operating results.
Current wording
Our business may be dependent on a limited number of significant customers, and the loss of one or more such customers could adversely affect our operating results.
Previous wording
Our RTLS business depends on our ability to successfully obtain payment from our customers of the amounts they owe us for products received from us and any work performed by us. The timely collection of our receivables allows us to generate cash flow, provide working capital and continue our business operations. Our customers may fail to pay or delay the payment of invoices for a number of reasons, including financial difficulties resulting from macroeconomic conditions, lack of an approved budget as a result of administrative delays, or participating in bankruptcy proceedings. An extended delay or default in payment relating to a significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable. If we are unable to timely collect our receivables from our customers for any reason, our business and financial condition could be adversely affected.
Current wording
If we are unable to timely collect receivables for any reason, our liquidity, financial condition and results of operations could be materially adversely affected.
Previous wording
Defects, errors, or vulnerabilities in our products or services or the failure of such products or services to prevent a security breach, could harm our reputation and adversely affect our results of operations.
Current wording
Defects, errors or vulnerabilities in the products we distribute, service or develop, or the failure of such products to perform as expected, could harm our reputation and adversely affect our results of operations.
Previous wording
Any defects, errors or vulnerabilities in our products could result in:
Current wording
In addition, errors in software updates, firmware updates or configuration changes could result in product malfunction, degraded performance, loss of data, reduced reliability or safety incidents. Any defects, errors or vulnerabilities in products we distribute, service or develop could result in:
Previous wording
If our location-based security and detection products do not effectively interoperate with our customers’IT infrastructure, installations could be delayed or cancelled, which would harm our financial condition, operating results and growth prospects.
Current wording
If the UAS products and solutions we distribute and support do not effectively interoperate with our customers’ systems and operational requirements, deployments could be delayed or cancelled, which would harm our financial condition, operating results and growth prospects.
Previous wording
Our RTLS products must effectively interoperate with our customers’ existing or future IT infrastructure, which often has different specifications, utilizes multiple protocol standards, deploys products from multiple vendors, and contains multiple generations of products that have been added over time. As a result, when problems occur in a company’s infrastructure, it may be difficult to identify the sources of these problems. If we find errors in the existing software or defects in the hardware used in our customers’ infrastructure, we may have to modify our customers’ software or hardware so that our products will interoperate with their infrastructure. In such cases, our products may be unable to provide significant performance improvements for applications deployed in the infrastructure of our customers. These issues could cause longer installation times for our products and could cause order cancellations, either of which would adversely affect our business, results of operations and financial condition. In addition, other customers may require products to comply with certain security or other certifications and standards. If our products are late in achieving or fail to achieve compliance with these certifications and standards, or competitors sooner achieve compliance with these certifications and standards, we may be disqualified from selling our products to such customers, or may otherwise be at a competitive disadvantage, either of which would harm our business, results of operations, and financial condition.
Current wording
In addition, certain customers, particularly public sector, defense, and enterprise customers, may require products to comply with specific security, procurement, communications, data handling or other standards and certifications. If products we distribute are late in achieving, or fail to achieve, compliance with applicable certifications and standards, or competitors sooner achieve such compliance, we may be disqualified from selling to such customers or may otherwise be at a competitive disadvantage, which could harm our business, results of operations and financial condition.
Previous wording
The TriFan 600 is still in the development stage, and we are still working to obtain FAA type certification of the TriFan 600. Certification by the FAA will be required for the sale of the TriFan 600 in the civil or commercial market in the United States. The process to obtain such certification is expensive and time consuming and has inherent engineering risks. These include (but are not limited to) ground test risks such as structural strength and fatigue resistance, and structural flutter modes. Flight test risks include (but are not limited to) stability and handling over the desired center-of-gravity range, performance extremes (stalls, balked-landing climb, single-engine climb), and flutter control effectiveness (aircraft roll effectiveness, controllability, various control failure safety). Delays in FAA certification can be expected to result in us incurring increased costs in attempting to correct any issues causing such delays. Also, the impact of new or changed laws or regulations on the TriFan 600’s certification or the costs of complying with such laws and regulations cannot be predicted.
Current wording
The TriFan 600 aircraft program has been paused. To the extent we decide to resume the program, certification by the FAA will be required for the sale of the TriFan 600 in the civil or commercial market in the United States. The process to obtain such certification is expensive and time consuming and has inherent engineering risks. These include (but are not limited to) ground test risks such as structural strength and fatigue resistance, and structural flutter modes. Flight test risks include (but are not limited to) stability and handling over the desired center-of-gravity range, performance extremes (stalls, balked-landing climb, single-engine climb), and flutter control effectiveness (aircraft roll effectiveness, controllability, various control failure safety). We cannot predict whether or when the TriFan 600 program will be resumed, and until it is, these certification risks are contingent on a future decision to re-engage the program. Any decision to resume the TriFan 600 program would require substantial additional capital and a commitment of engineering and management resources. Any resumption-related costs, delays or adverse developments could divert management attention and financial resources from our UAS operations, limit our ability to invest in the growth, staffing or expansion of our UAS business, or otherwise disrupt the execution of our operating strategy. These impacts could adversely affect our ability to meet customer demand, maintain service levels, or pursue new business opportunities in our UAS operations, and could materially adversely affect our business, financial condition and results of operations.
Previous wording
The pre-orders we have received for our TriFan 600 airplane are non-binding, conditional or written expressions of interest and may be terminated at any time prior to execution of a definitive purchase agreement. If these pre-orders are cancelled, modified, delayed or not placed in accordance with the terms agreed with each party, our business, results of operations, liquidity and cash flow will be materially adversely affected.
Current wording
Customer orders and service engagements for our UAS products and services and the pre-orders we have received for our aircraft may be non-binding, conditional or written expressions of interest and may be terminated at any time prior to execution of a definitive agreement, and cancellations, modifications or delays could materially adversely affect our business, liquidity and cash flows.
Previous wording
We operate in highly competitive markets and we may be required to reduce the prices for some of our products and services to remain competitive, which could adversely affect our results of operations.
Current wording
We operate in highly competitive markets characterized by rapid technological change, and we may be required to reduce prices or modify our offerings to remain competitive, which could adversely affect our results of operations.
Previous wording
The TriFan 600 potentially competes with a variety of aircraft manufacturers in the United States and abroad. Further, we could face competition from competitors of whom we are not aware that have developed or are developing technologies that will offer alternatives to the TriFan 600. Competitors could develop an aircraft that renders the TriFan 600 less competitive than we believe it will become. Many existing potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to significantly greater financial, technical and marketing resources. Other manufacturers may be developing a light, fixed-wing, VTOL airplane with performance similar to that of the TriFan 600.
Current wording
To the extent we resume our TriFan 600 aircraft program, such program potentially competes with a variety of aircraft manufacturers in the United States and abroad. We could face competition from competitors of whom we are not aware that have developed or are developing technologies that will offer alternatives to the TriFan 600. Competitors could develop an aircraft that renders the TriFan 600 less competitive than we believe it would become. Other manufacturers may be developing a light, fixed-wing VTOL aircraft with performance similar to that of the TriFan 600.
Previous wording
If we are unable to obtain and maintain adequate facilities and infrastructure, we may be unable to develop and manufacture the aircraft as expected, and our aircraft may require maintenance at frequencies or at costs that are greater than expected.
Current wording
If we are unable to obtain and maintain adequate facilities and infrastructure, we may be unable to effectively store, service, repair and distribute UAS products or develop and manufacture our products as our business grows.
Previous wording
Operations could be adversely affected by interruptions of production that are beyond our control.
Current wording
We may be adversely affected by interruptions in production or supply chain disruptions that are beyond our control, including disruptions impacting suppliers of UAS products or aircraft components if the TriFan 600 program is resumed.
Previous wording
We intend to produce the TriFan 600 and its derivatives using systems, components and parts developed and manufactured by third-party suppliers. This supply chain exposes us to multiple potential sources of delivery failure or component shortages for our aircraft, most of which are out of our control, including shortages of, or disruptions in the supply of, the raw materials used by our partners in the manufacture of components, disruptions to our partners’ workforce (such as strikes or labor shortfalls) and disruptions to, or capacity constraints affecting, shipping and logistics. Such suppliers may be subject to additional risks such as financial problems that limit their ability to conduct their operations. If any of these third parties experience difficulties, it may have a direct negative impact on us.
Current wording
If the TriFan 600 program is resumed, we would intend to produce the TriFan 600 using systems, components and parts developed and manufactured by third-party suppliers. This supply chain exposes us to multiple potential sources of delivery failure or component shortages for our aircraft, most of which are out of our control. Such suppliers may be subject to additional risks such as financial problems that limit their ability to conduct their operations. If any of these third parties experience difficulties, it could have a direct negative impact on us.
Previous wording
While we believe that we may be able to establish alternate supply relationships and can obtain replacement components, we may be unable to do so in the short term or at all at prices that are acceptable to us or may need to recertify components. We may experience source disruptions in our or our partners’ supply chains, which may cause delays in our overall production process for both prototype and commercial production aircraft.
Current wording
While we believe that we may be able to establish alternate supply relationships and can obtain replacement components if the program is resumed, we may be unable to do so in the short term or at all at prices that are acceptable to us or may need to recertify components, which could increase costs or delay development timelines.
Previous wording
If we needed to find alternative suppliers for any of the key components of our aircraft, then this could increase our costs and adversely affect our ability to receive such components on a timely basis, or at all, which could cause significant delays in our overall projected timelines for the delivery of our aircraft and adversely affect our relationships with our customers.
Current wording
If we needed to find alternative suppliers for any key components, then this could increase our costs and adversely affect our ability to receive such components on a timely basis, or at all, which could cause significant delays if we resume the program in the development, certification or commercialization of our aircraft and adversely affect our relationships with customers.
Previous wording
Our current research and development efforts may not produce successful products or features that result in significant revenue, cost savings or other benefits in the near future. If we do not realize significant revenue from our research and development efforts, our business and operating results could be adversely affected.
Current wording
Our research and development efforts may not produce successful products or capabilities that result in significant revenue, cost savings or other benefits.
Previous wording
Our future plans include significant investments in research and development and related product opportunities. Our management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain a competitive position. However, we may not receive significant revenue from these investments in the near future, or these investments may not yield the expected benefits, either of which could adversely affect our business and operating results.
Current wording
Our future plans include continued investments in research and development with respect to our UAS solutions business and the development of capabilities within our ADS division. We believe we must continue to dedicate significant resources to these efforts to maintain a competitive position and advance our UAS offerings. However, we may not receive significant revenue from these investments in the near future, if at all, and these investments may not yield the expected benefits. In addition, to the extent we determine to resume the TriFan 600 program in the future, such efforts would require substantial additional investment and may not result in commercially viable products or generate revenues. If we do not realize the anticipated returns from our research and development efforts, our business, financial condition and results of operations could be materially adversely affected.
Previous wording
Although we have received certain patents for the TriFan 600 issued by the US Patent and Trademark Office (USPTO) and various foreign jurisdictions, there is no guarantee that we will receive one or more additional patents for which we will apply to the USPTO or for which we have applied or will apply in foreign jurisdictions. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are complex and often uncertain and are subject to change. There is no guarantee that any court will rule in our favor in the event of a dispute related to our intellectual property. In the absence of further patent protection, it may be more difficult for us to achieve commercial production of the TriFan 600. In addition, any patents issued in the future may not provide us with any competitive advantages because our competitors may independently develop similar or alternative technologies or products that are equal to or superior to our TriFan 600 technology without infringing on any of our intellectual property rights or design around our proprietary technologies.
Current wording
The Company holds patents for the TriFan 600 issued by the United States Patent and Trademark Office and in various foreign jurisdictions, and may seek additional patent protection in connection with the TriFan 600 program or other technologies developed through the ADS division. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and intellectual property rights are complex, uncertain and subject to change. There is no guarantee that any court will rule in our favor in the event of a dispute related to our intellectual property.
Previous wording
Furthermore, our proprietary software is protected by common law copyright laws, as opposed to registration under copyright statutes. We have not registered copyrights on any of the proprietary software we have developed. Our performance and ability to compete are dependent to a significant degree on our proprietary technology. Common law protection may be narrower than that which we could obtain under registered copyrights. As a result, we may experience difficulty in enforcing our copyrights against certain third party infringements. As part of our confidentiality-protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information. There can be no assurance that the steps we have taken will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable. Moreover, the laws of other countries may afford us little or no protection of our intellectual property. Our inability to protect our intellectual property rights could adversely affect our financial condition, operating results and growth prospects.
Current wording
Certain proprietary software and related technology used in our UAS operations and, to the extent applicable, in connection with our ADS division’s development activities, is protected by common law copyright rather than registered copyright. We have not registered copyrights on proprietary software we have developed. Common law protection may be narrower than registered copyright protection. As a result, we may experience difficulty enforcing our copyrights against third-party infringement. As part of our confidentiality procedures, we enter into agreements with employees and consultants and limit access to and distribution of our software, documentation and other proprietary information. There can be no assurance that these measures will prevent misappropriation or that such agreements will be enforceable. The laws of other countries may afford us little or no protection of our intellectual property. Our inability to protect our intellectual property rights could adversely affect our financial condition, operating results and growth prospects.
Previous wording
We also rely on a variety of technology that we license from third parties. There can be no assurance that these third party technology licenses will continue to be available to us on commercially reasonable terms, if at all. The loss of or inability to maintain or obtain upgrades to any of these technology licenses could result in delays in completing software enhancements and new development until equivalent technology could be identified, licensed or developed and integrated. Any such delays would materially and adversely affect our business.
Current wording
We also rely on a variety of technology that we license from third parties in connection with our UAS operations. There can be no assurance that these third party technology licenses will continue to be available to us on commercially reasonable terms, if at all. The loss of or inability to maintain or obtain upgrades to any of these technology licenses could result in delays in completing software enhancements and new development until equivalent technology could be identified, licensed or developed and integrated. Any such delays would materially and adversely affect our business.
Previous wording
As of December 31, 2024, we had federal net operating loss carryforwards (“NOLs”) of approximately $96.9 million, of which approximately $5.3 million will begin to expire in 2037 and the remainder do not expire. Under the Tax Cuts and Jobs Act, federal NOLs generated by us in tax years through December 31, 2017 may be carried forward for 20 years and may fully offset taxable income in the year utilized and federal NOLs generated by us in tax years beginning after December 31, 2017 may be carried forward indefinitely but may only be used to offset 80% of our taxable income annually. Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change federal NOLs and other tax attributes (such as research and development tax credits) to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a greater than 50 percentage point change (by value) in a corporation’s equity ownership by certain stockholders over a rolling three-year period. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control). As a result, our ability to our pre-change federal NOLs and other tax attributes to offset future taxable income and taxes could be subject to limitations. Similar provisions of state tax law may also apply. For these reasons, even if we achieve profitability, we may be unable to use a material portion of our NOLs and other tax attributes which may have an adverse impact on our business, financial condition and results of operations.
Current wording
In general, an ownership change occurs when there is a greater than 50 percentage point change in the ownership of a corporation’s stock by certain stockholders over a rolling three-year period. We may have experienced ownership changes in the past, including in connection with business combinations, equity financings, preferred stock issuances, conversions, exchanges, or other transactions, and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside our control.
Previous wording
We may enter into joint venture, teaming and other arrangements, and these activities involve risks and uncertainties. A failure of any such relationship could have material adverse results on our business and results of operations.
Current wording
We may enter into joint venture, teaming and other arrangements, and these activities involve risks and uncertainties, and a failure of any such relationship could have material adverse results on our business and results of operations.
Previous wording
We may enter into joint venture, teaming and other arrangements. These activities involve risks and uncertainties, including the risk of the joint venture or applicable entity failing to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments, the challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements. In addition, we do not currently have arrangements in place that will allow us to fully execute our business plan, including, without limitation, final supply and manufacturing agreements. Moreover, existing or future arrangements may contain limitations on our ability to enter into arrangements with other partners. A failure of our business relationships could have a material adverse effect on our business and results of operations.
Current wording
We may enter into joint venture, teaming and other arrangements including strategic partnerships, supplier arrangements, dealer relationships, distribution agreements, and other commercial relationships. These activities involve risks and uncertainties, including the risk of the joint venture or applicable entity failing to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments, the challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements.
Previous wording
The potential physical effects of climate change, such as increased frequency and severity of high wind conditions, storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, could affect our operations, infrastructure and financial results. Climate change risks could result in but are not limited to operational risk from the physical effect of climate events on our terminal facilities, production facilities and other assets, as well as transitional risks, including new or more stringent regulatory requirements, increased monitoring and disclosure requirements, and potential effects on our reputation and/or changes in our business. We could incur significant costs to improve the climate resiliency of our aircraft or infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
Current wording
The potential physical effects of climate change, such as increased frequency and severity of high wind conditions, storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, could affect our operations, infrastructure and financial results. Climate change risks could result in, but are not limited to, operational risk from the physical effect of climate events on our facilities, distribution and service infrastructure, and other assets, as well as supply chain disruptions affecting the availability and cost of components and products that we distribute or use in our development activities. We could incur significant costs to improve resiliency of our infrastructure and operations and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
Previous wording
There is an increasing focus from investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to ESG matters. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate. The growing investor demand for measurement of non-financial performance is addressed by third-party providers of sustainability assessments and ratings with respect to public companies. The criteria by which our corporate responsibility practices are assessed may change due to changes in the sustainability landscape, which could cause us to undertake costly initiatives to satisfy such new criteria. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies and/or actions with respect to corporate social responsibility are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies.
Current wording
There is increasing focus from investors, employees, customers, regulators and other stakeholders concerning corporate responsibility and ESG matters. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies, disclosures or actions relating to ESG matters are inadequate or inconsistent with their expectations.
Previous wording
Insurance and contractual protections may not always cover potential claims, lost revenue, increased expenses or liquidated damages payments, which could adversely affect our financial results.
Current wording
Insurance and contractual protections may not cover product liability, operational claims, lost revenue, increased expenses or liquidated damages, which could adversely affect our financial results.
Previous wording
Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not expect these conditions to improve in the near future.
Current wording
Difficult conditions in the global economy and capital markets may materially adversely affect our business, results of operations and access to capital.
Previous wording
We have a history of losses, and in order to successfully execute our business plan, we will need to raise additional capital through additional debt or equity financing, which may otherwise not be available on reasonable terms or at all.
Current wording
We have a history of losses, and in order to successfully execute our business plan, including strategic acquisitions and the development of our advanced systems and domestic manufacturing initiatives, we will need to raise additional capital through additional debt or equity financing, which may otherwise not be available on reasonable terms or at all.
Previous wording
We incurred net losses of approximately $35.6 million and $25.1 million for the fiscal years ended December 31, 2024 and 2023, respectively, and we had an accumulated deficit of approximately $93.6 million as of December 31, 2024. These losses and prior-year losses have resulted in significant negative cash flows. The continuation of our Company is dependent upon attaining and maintaining profitable operations in our RTLS business and executing timely on our design, FAA certification and eventual production of the TriFan 600 and raising additional capital as needed, but there can be no assurance that we will be able to raise any further financing.
Current wording
We have incurred net losses in recent periods and have an accumulated deficit as of December 31, 2025. These and prior losses have resulted in significant negative cash flows. Our ability to execute our business plan depends on attaining and maintaining profitable operations in our UAS business and other operations and raising additional capital as needed, including for strategic acquisitions and the development of our advanced systems and domestic manufacturing initiatives. There can be no assurance that we will be able to raise additional financing.
Previous wording
We may not be able to successfully integrate the business and operations of entities that we have acquired, been acquired by or may acquire in the future into our ongoing business operations, which may result in our inability to fully realize the intended benefits of these acquisitions, or may disrupt our current operations, which could have a material adverse effect on our business, financial position and/or results of operations.
Current wording
We may not be able to successfully integrate the business and operations of Drone Nerds or other entities that we have acquired or may acquire in the future, and we may not realize the intended benefits of these acquisitions. In addition, we may be exposed to unanticipated liabilities or risks arising from the historic operations of acquired businesses, which could materially and adversely affect our business, financial condition and results of operations.
Previous wording
We continue to integrate the technology and operations acquired in connection with our recent acquisitions, including but not limited to the Legacy XTI technology and operations. This process involves complex operational, technological and personnel-related challenges, which are time-consuming and expensive and may disrupt our ongoing business operations. Furthermore, integration involves a number of risks, including, but not limited to:
Current wording
We are in the process of integrating the operations of Drone Nerds into our business, and this process involves complex operational, technological and personnel-related challenges, which are time-consuming and expensive and may disrupt our ongoing business operations. Integration involves a number of risks, including, but not limited to:
Previous wording
These factors could cause us to not fully realize the anticipated financial and/or strategic benefits of the acquisitions, which could have a material adverse effect on our business, financial condition and/or results of operations.
Current wording
These risks could prevent us from successfully integrating Drone Nerds and any other businesses we may acquire and could cause us to not fully realize the anticipated financial, revenue synergies and/or other strategic benefits of the Drone Nerds acquisition or future acquisitions when expected, or at all, which could have a material adverse effect on our business, financial condition and results of operations.
Previous wording
We have completed several strategic transactions including acquisitions and dispositions, which may make it difficult for potential investors to evaluate our future business. Any future acquisitions or dispositions could disrupt our business and harm our business, financial condition or operating results. Furthermore, due to the risks and uncertainties related to the acquisition of new businesses, any such acquisition does not guarantee that we will be able to attain profitability.
Current wording
We have completed several strategic transactions, including acquisitions and dispositions, which may make it difficult for investors to evaluate our business and prospects, and future acquisitions or dispositions could disrupt our business and harm our financial condition or operating results.
Previous wording
A significant portion of the purchase price related to our strategic acquisitions prior to the XTI Merger was allocated to goodwill and intangible assets that are subject to periodic impairment evaluations. An impairment loss could have a material adverse impact on our financial condition and results of operations.
Current wording
A significant portion of the purchase price related to our strategic acquisitions was allocated to goodwill and intangible assets that are subject to periodic impairment evaluations, and an impairment loss could have a material adverse impact on our financial condition and results of operations.
Previous wording
As required by current accounting standards, we review intangible assets for impairment either annually or whenever changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment to goodwill is higher during the early years following an acquisition. This is because the fair values of these assets align very closely with what we paid to acquire the reporting units to which these assets are assigned. As a result, the difference between the carrying value of the reporting unit and its fair value (typically referred to as “headroom”) is smaller at the time of acquisition. Until this headroom grows over time, due to business growth or lower carrying value of the reporting unit, a relatively small decrease in reporting unit fair value can trigger impairment charges. When impairment charges are triggered, they tend to be material due to the size of the assets involved. Our business could be adversely affected, and impairment of goodwill could be triggered, if any of the following were to occur: higher attrition rates than planned as a result of the competitive environment or our inability to provide products and services that are competitive in the marketplace, lower-than-planned adoption rates by customers, higher-than-expected expense levels to provide services to customers, sustained declines in our stock price and related market capitalization and changes in our business model that may impact one or more of these variables. During the years ended December 31, 2024 and 2023, we recorded an impairment charge to our intangible assets of approximately $2.5 million and zero, respectively.
Current wording
As required by current accounting standards, we review goodwill and indefinite-lived intangible assets for impairment at least annually, and we evaluate long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment to goodwill is generally higher during the early years following an acquisition because the difference between the carrying value of a reporting unit and its fair value may be relatively small. Until this difference increases over time due to business growth or reductions in the carrying value of the reporting unit, a relatively small decrease in fair value could trigger impairment charges.
Previous wording
Our business depends on experienced and skilled personnel, and if we are unable to attract and integrate skilled personnel, it will be more difficult for us to manage our business and complete contracts.
Current wording
Our business depends on experienced and skilled personnel, and if we are unable to attract, retain and integrate such personnel, or if we lose key personnel, our operations and strategic execution may be adversely affected.
Showing the first 40 of 56 pairs. Open the source sections for the rest.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
If we are not able to continue to increase sales of our UAS products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues. In addition, certain customer demand may depend on government budgets, procurement cycles and contract awards, which are difficult to predict.
Current report — wording carried from elsewhere
We operate in highly competitive markets in both the UAS and the aerospace industries, which are characterized by rapid technological innovation, evolving customer requirements, changing industry standards and frequent introductions of new products, product enhancements, software capabilities and distribution models. Many of our current and potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to significantly greater financial, technical and marketing resources.
Current report — wording carried from elsewhere
If an ownership change occurs, our ability to utilize our pre-change NOLs and other tax attributes, including research and development tax credits, to offset future taxable income and taxes could be subject to significant annual limitations. Similar provisions of state tax law may also apply.
Current report — wording carried from elsewhere
As a result, even if we achieve profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could adversely affect our business, financial condition and results of operations.
Current report — wording carried from elsewhere
In addition, our business plans, including our UAS operations, depend in part on relationships with third parties, including suppliers, manufacturers, service providers and other strategic partners. Moreover, existing or future arrangements may contain limitations on our ability to enter into arrangements with other partners. A failure of our business relationships could have a material adverse effect on our business and results of operations.
Current report — wording carried from elsewhere
Our business could be adversely affected, and impairment charges could be triggered, if any of the following were to occur: higher attrition rates than planned as a result of the competitive environment or our inability to provide products and services that are competitive in the marketplace, lower-than-planned customer adoption rates, higher-than-expected expense levels, sustained declines in our stock price and related market capitalization, adverse changes in macroeconomic conditions, or changes in our business model.
Current report — wording carried from elsewhere
As a publicly trading reporting company with operations in the United States and internationally, we interact regularly with regulatory and self-regulatory agencies in the United States or other jurisdictions in which we operate, including the SEC and the Nasdaq Stock Market. In addition, our operations may be subject to regulation by other governmental agencies, including agencies involved in aviation, UAS, communications, procurement and trade compliance.
Current report — wording carried from elsewhere
We have been and may in the future be the subject of SEC and other regulatory investigations and may be required to comply with informal or formal orders or other requests for information or documentation from such government authorities and regulators regarding our compliance with national, regional and local laws and regulations, including the rules and regulations under the Securities Act and the Exchange Act. Such laws and regulations and their interpretation and applications may also change from time to time.