XTI Aerospace, Inc. Goodwill & Intangibles Disclosure

Note 7 - Goodwill and Intangible Assets

 

Goodwill

 

In connection with the XTI and Inpixon Merger, the excess of the purchase price over the estimated fair value of the net assets assumed of $12.4 million was recognized as goodwill.

 

The following table summarizes the changes in the carrying amount of Goodwill for the year ended December 31, 2024 (in thousands):

 

		Amount
Beginning balance - January 1, 2024		$	—
Goodwill recognized in connection with XTI Merger - Note 5			12,398
Foreign currency translation adjustment			(326	)
Ending balance – December 31, 2024		$	12,072

 

The Company tests goodwill for impairment at the reporting unit level annually, on October 1, or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. In accordance with ASC 350, the Company performed a qualitative assessment as of December 31, 2024, to determine if there were any indicators of goodwill impairment that would require a quantitative analysis to be performed. Due to the qualitative analysis, the Company determined that there were triggering indicators of goodwill impairment during the three months ended December 31, 2024 in the form of a sustained decrease of the Company’s stock price and impairment recognized on long-lived assets under ASC 360.

 

In accordance with ASC 350, given a triggering event was identified, the Company performed a quantitative goodwill impairment analysis related to its Industrial IoT reporting unit, and based on such analysis, the Company concluded that the carrying amount of the reporting unit did not exceed its estimated fair value, indicating that the goodwill of the reporting unit was not impaired. The Company utilized an income approach to assess the fair value of the reporting unit as of December 31, 2024. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), a discount rate of 34% reflecting the risk inherent in future cash flows, perpetual growth rate of 2%, and projected future economic and market conditions.

Intangible Assets

 

Intangible assets at December 31, 2024 and 2023 consisted of the following (in thousands):

 

		December 31, 2024
		Gross Amount				Accumulated Amortization				Impairment				Net Carrying Amount				Remaining Weighted Average Useful Life as of December 31, 2024
Patents		$	468			$	(184	)		$	—			$	284				9.8
Trade Name/Trademarks			897				(142	)			(451	)			304				6.1
Proprietary Technology			2,860				(326	)			(1,583	)			951				5.6
Customer Relationships			684				(109	)			(473	)			102				4.2
In-Process R&D			243				—				—				243				3.0
Totals		$	5,152			$	(761	)		$	(2,507	)		$	1,884

 

Amortization expense for the year ended December 31, 2024 was approximately $0.62 million. Amortization expense for the year ended December 31, 2023 was approximately $0.03 million.

 

Future amortization expense on intangibles assets is anticipated to be as follows (in thousands):

 

For the Years Ending December 31,		Amount
2025		$	361
2026			361
2027			361
2028			280
2029 and thereafter			521
Total		$	1,884

 

In accordance with ASC 360, the Company performed a qualitative assessment as of December 31, 2024, to determine if there were any indicators of impairment that would require a quantitative analysis to be performed. Based on the qualitative analysis, the Company determined that there were triggering indicators of long-lived asset impairment during the three months ended December 31, 2024 in the form of a sustained decrease of the Company’s stock price and the Company beginning planning the process of winding down and/or selling the Nanotron business in the quarter ended December 31, 2024. The Company notes that based on a quantitative assessment, the Company recorded an impairment to its Trade Names & Trademarks, Proprietary Technology, and Customer Relationships of $451,000, $1,583,000, and $473,000, respectively, for the year ended December 31, 2024, which is included in loss from operations on the statements of operations. The Company notes that these assets were part of the Company’s Industrial IoT segment.

 

The Company assessed the fair value of the Customer Relationships by using an income approach in the form of a discounted cash flow model, which considered projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions. The Company assessed the fair value of the Trade Names & Trademarks and Proprietary Technology by using an income approach in the form of a relief from royalty model, which considered a specified royalty rate, discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.

 

The Company notes that for the Trade Names & Trademarks, Proprietary Technology, and Customer Relationships included in the asset groups that were assessed for fair value, the Company reassessed the useful lives of these long-lived assets. Management notes that the remaining useful lives of the Trade Names & Trademarks, Proprietary Technology, and Customer Relationships were 8 years, 5 years, and 0 years, respectively.