XTI Aerospace, Inc. 10-Q

Item 1. Financial Statements XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except number of shares and par value data) As of September 30, 2025 As of December 31, 2024 (Unaudited) Assets Current Assets Cash and cash equivalents $ 32,198 $ 4,105 Accounts receivable, net of allowance for credit losses of $ 37 and $ 18 as of September 30, 2025 and December 31, 2024, respectively 2,095 706 Other receivables 38 538 Inventories 1,433 2,214 Prepaid expenses and other current assets 918 1,018 Total Current Assets 36,682 8,581 Property and equipment, net 242 206 Operating lease right-of-use asset, net 243 340 Intangible assets, net 1,169 1,884 Goodwill 9,160 12,072 Other assets 435 1,208 Total Assets $ 47,931 $ 24,291 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 1 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except number of shares and par value data) As of September 30, 2025 As of December 31, 2024 (Unaudited) Liabilities, Mezzanine Equity, and Stockholders’ Equity Current Liabilities Accounts payable $ 2,560 $ 5,487 Related party payables — 51 Accrued expenses and other current liabilities 2,263 6,703 Accrued interest 342 522 Customer deposits 1,350 1,350 Warrant liability 28,228 — Operating lease obligation, current 98 119 Deferred revenue 737 532 Short-term debt — 2,657 Total Current Liabilities 35,578 17,421 Long Term Liabilities Long-term debt — 65 Operating lease obligation, noncurrent 155 231 Total Liabilities 35,733 17,717 Commitments and Contingencies (Note 17) Mezzanine Equity Representative and placement agent warrants, net of issuance costs of $ 96 1,744 — Stockholders’ Equity Preferred Stock - $ 0.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024 — — Series 4 Convertible Preferred Stock - 10,415 shares authorized; 1 share issued and outstanding as of September 30, 2025 and December 31, 2024 — — Series 5 Convertible Preferred Stock - 12,000 shares authorized; 126 shares issued and outstanding as of September 30, 2025 and December 31, 2024 — — Series 9 Preferred Stock - 20,000 shares authorized; 0 shares issued and outstanding as of September 30, 2025, and 11,302 shares issued and 1,331 shares outstanding as of December 31, 2024 — 1,331 Common Stock - $ 0.001 par value; 500,000,000 shares authorized; 30,861,816 shares issued and outstanding as of September 30, 2025 and 1,685,021 shares issued and outstanding as of December 31, 2024 31 2 Additional paid-in capital 150,263 99,425 Accumulated other comprehensive income (loss) 898 ( 622 ) Accumulated deficit ( 140,738 ) ( 93,562 ) Total Stockholders’ Equity 10,454 6,574 Total Liabilities, Mezzanine Equity, and Stockholders’ Equity $ 47,931 $ 24,291 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Revenues $ 2,484 $ 918 $ 3,568 $ 2,169 Cost of Revenues 1,407 398 1,673 846 Gross Profit 1,077 520 1,895 1,323 Operating Expenses Research and development 1,985 1,228 5,649 2,840 Sales and marketing 2,741 1,019 5,267 2,160 General and administrative 11,106 2,293 22,434 16,422 Merger-related transaction costs — — — 6,490 Impairment of goodwill — — 4,049 — Impairment of intangible assets — — 631 — Amortization of intangible assets 54 196 206 431 Total Operating Expenses 15,886 4,736 38,236 28,343 Loss from Operations ( 14,809 ) ( 4,216 ) ( 36,341 ) ( 27,020 ) Other (Expense) Income Interest expense, net ( 1 ) ( 222 ) ( 219 ) ( 553 ) Amortization of deferred loan costs — — — ( 17 ) Loss on extinguishment of debt — — ( 421 ) ( 6,732 ) Warrant issuance expense ( 785 ) — ( 6,580 ) — Change in fair value of convertible notes — — — 12,882 Change in fair value of warrant liability 2,151 — ( 3,280 ) ( 281 ) Other ( 1 ) 3 ( 340 ) ( 10 ) Total Other (Expense) Income 1,364 ( 219 ) ( 10,840 ) 5,289 Net Loss, before tax ( 13,445 ) ( 4,435 ) ( 47,181 ) ( 21,731 ) Income tax benefit (provision) ( 1 ) — 5 ( 16 ) Net Loss ( 13,446 ) ( 4,435 ) ( 47,176 ) ( 21,747 ) Preferred stock return — ( 185 ) ( 29 ) ( 496 ) Deemed dividend — ( 54 ) — ( 514 ) Net Loss Attributable to Common Stockholders $ ( 13,446 ) $ ( 4,674 ) $ ( 47,205 ) ( 22,757 ) Net Loss Per Share - Basic and Diluted $ ( 0.61 ) $ ( 33.40 ) $ ( 4.33 ) $ ( 308.53 ) Weighted Average Shares Outstanding Basic and Diluted 22,065,141 139,944 10,914,152 73,759 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Net Loss $ ( 13,446 ) $ ( 4,435 ) $ ( 47,176 ) $ ( 21,747 ) Change in fair value of convertible note receivable — — — 59 Unrealized foreign exchange gain from cumulative translation adjustments 14 663 1,520 465 Comprehensive Loss $ ( 13,432 ) $ ( 3,772 ) $ ( 45,656 ) $ ( 21,223 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY For the three and nine months ended September 30, 2025 (Unaudited) (In thousands, except share data) Series 9 Preferred Stock at Redemption Value Common Stock Additional Paid-In Accumulated Other Comprehensive (Loss) Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Income Deficit Equity Balance - January 1, 2025 1,331 $ 1,331 1,685,021 $ 2 $ 99,425 $ ( 622 ) $ ( 93,562 ) $ 6,574 Common shares issued for net cash proceeds of ATM offering — — 169,299 — 1,667 — — 1,667 Common shares issued for net cash proceeds of public offerings — — 2,219,746 2 17,900 — — 17,902 Common shares issued for conversion of debt — — 240,229 — 750 — — 750 Common shares issued for exercise of liability classified warrants — — 300,000 — 408 — — 408 Redemption of Series 9 Preferred Stock ( 1,331 ) ( 1,331 ) — — ( 96 ) — — ( 1,427 ) Stock-based compensation — — — — 455 — — 455 Cumulative translation adjustment — — — — — 467 — 467 Other — — 173,245 1 4 — — 5 Net loss — — — — — — ( 12,872 ) ( 12,872 ) Balance - March 31, 2025 — — 4,787,540 5 120,513 ( 155 ) ( 106,434 ) 13,929 Common shares issued for net cash proceeds of public offerings — — 6,231,200 6 ( 457 ) — — ( 451 ) Common shares issued for exercise of liability classified warrants — — 6,771,600 7 18,002 — — 18,009 Stock-based compensation — — 125,000 — 722 — — 722 Cumulative translation adjustment — — — — — 1,039 — 1,039 Other — — — — 15 — — 15 Net loss — — — — — — ( 20,858 ) ( 20,858 ) Balance - June 30, 2025 — — 17,915,340 18 138,795 884 ( 127,292 ) 12,405 Common shares issued for net cash proceeds of public offerings — — 11,946,000 12 3,121 — — 3,133 Common shares issued for exercise of liability classified warrants — — 966,976 1 1,997 — — 1,998 Stock-based compensation — — 33,500 — 6,350 — — 6,350 Cumulative translation adjustment — — — — — 14 — 14 Net loss — — — — — — ( 13,446 ) ( 13,446 ) Balance - September 30, 2025 — $ — 30,861,816 $ 31 $ 150,263 $ 898 $ ( 140,738 ) $ 10,454 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY For the three and nine months ended September 30, 2024 (Unaudited) (In thousands, except share data) Series 9 Preferred Stock at Redemption Value Common Stock Additional Paid-In Accumulated Other Comprehensive (Loss) Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Income Deficit Equity (Deficit) Balance - January 1, 2024 — $ — 12,791 $ — $ 26,330 $ — $ ( 57,959 ) $ ( 31,629 ) Common and preferred shares issued via merger 11,302 11,302 8,303 — 14,303 — — 25,605 Common shares issued for conversion of debt — — 11,551 — 9,614 — — 9,614 Inducement loss on debt conversions — — — — 6,732 — — 6,732 Common shares issued to Xeriant, Inc. — — 1,194 — — — — — Common shares issued for cashless exercise of warrants and options — — 1,928 — — — — — Capital contribution - forgiveness of related party payable — — — — 380 — — 380 Stock-based compensation — — 3,911 — 5,792 — — 5,792 Cumulative translation adjustment — — — — — ( 166 ) — ( 166 ) Series 9 Preferred Stock dividend accrued — — — — ( 61 ) — — ( 61 ) Net loss — — — — — — ( 2,602 ) ( 2,602 ) Balance - March 31, 2024 11,302 11,302 39,678 — 63,090 ( 166 ) ( 60,561 ) 13,665 Common shares issued in exchange of Series 9 Preferred Stock ( 3,550 ) ( 3,550 ) 11,997 — 3,727 — — 177 Deemed dividend related to Series 9 Preferred Stock exchange — — — — ( 177 ) — — ( 177 ) Common shares issued in exchange of warrants — — 5,969 — 1,981 — — 1,981 Deemed dividend related to December 2023 warrant exchange — — — — ( 283 ) — — ( 283 ) Common shares issued for exercise of equity classified warrants — — 82 — 2 — — 2 Common shares issued for net cash proceeds of ATM offering — — 37,201 — 8,675 — — 8,675 Common shares issued as settlement of accrued compensation — — 10,722 — 1,192 — — 1,192 Common shares issued as prepayment for services — — 1,718 — 335 — — 335 Stock-based compensation — — — — ( 59 ) — — ( 59 ) Series 9 Preferred Stock dividend accrued — — — — ( 250 ) — — ( 250 ) Change in fair value of convertible note receivable — — — — — 59 — 59 Cumulative translation adjustment — — — — — ( 32 ) — ( 32 ) Net loss — — — — — — ( 14,710 ) ( 14,710 ) Balance - June 30, 2024 7,752 7,752 107,367 — 78,233 ( 139 ) ( 75,271 ) 10,575 Common shares issued in exchange of Series 9 Preferred Stock ( 1,075 ) ( 1,075 ) 16,787 — 1,129 — — 54 Deemed dividend related to Series 9 Preferred Stock exchange — — — — ( 54 ) — — ( 54 ) Common shares issued for net cash proceeds of ATM offering — — 12,762 — 1,035 — — 1,035 Common shares issued as settlement of accrued compensation — — 11,100 — 1,101 — — 1,101 Stock-based compensation — — 4,020 — ( 1,889 ) — — ( 1,889 ) Cumulative translation adjustment — — — — — 663 — 663 Series 9 Preferred Stock dividend accrued — — — — ( 185 ) — — ( 185 ) Net loss — — — — — — ( 4,435 ) ( 4,435 ) Balance - September 30, 2024 6,677 $ 6,677 152,036 $ — $ 79,370 $ 524 $ ( 79,706 ) $ 6,865 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 XTI AEROSPACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the Nine Months Ended September 30, 2025 2024 Cash Flows Used in Operating Activities Net loss $ ( 47,176 ) $ ( 21,747 ) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation and amortization 103 81 Amortization of intangible assets 206 431 Amortization of right-of-use asset 100 177 Non-cash interest expense, net of interest income 145 267 Stock-based compensation 7,527 3,844 Impairment of goodwill 4,049 — Impairment of intangible assets 631 — Change in fair value of convertible notes payable — ( 12,882 ) Loss on extinguishment of debt 421 6,732 Warrant issuance expense 6,580 — Change in fair value of warrant liability 3,280 281 Change in value of warrant asset — 24 Unrealized gain on foreign currency transactions ( 2 ) ( 123 ) Other 22 34 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 1,293 ) ( 72 ) Inventories 1,016 271 Prepaid expenses and other current assets 101 247 Other assets 287 32 Accounts payable ( 1,940 ) 2,514 Related party payables ( 51 ) — Accrued expenses and other current liabilities ( 4,667 ) 5,708 Accrued interest 67 154 Deferred revenue 336 ( 115 ) Operating lease obligation ( 98 ) ( 163 ) Net Cash Used in Operating Activities ( 30,356 ) ( 14,305 ) Cash Flows (Used in) Provided by Investing Activities Purchase of property and equipment ( 126 ) ( 54 ) Cash received in purchase of Inpixon — 2,968 Purchase of intangible asset — ( 39 ) Net Cash (Used in) Provided by Investing Activities ( 126 ) 2,875 Cash Provided by Financing Activities Net proceeds from sale of common stock and pre-funded warrants via public offerings 57,051 — Net proceeds from ATM stock offering 1,667 9,582 Net proceeds from the exercise of equity classified warrants — 2 Net proceeds from the exercise of liability classified warrants 4,061 — Net proceeds from promissory notes — 2,000 Net proceeds from loan from Inpixon (prior to merger) — 1,012 Redemption of Series 9 Preferred Stock ( 1,427 ) — Repayments of promissory notes ( 2,784 ) ( 668 ) Net Cash Provided by Financing Activities 58,568 11,928 Effect of Foreign Exchange Rate on Changes on Cash 7 8 Net Increase in Cash and Cash Equivalents 28,093 506 Cash and Cash Equivalents - Beginning of period 4,105 5 Cash and Cash Equivalents - End of period $ 32,198 $ 511 Supplemental Disclosure of cash flow information: Cash paid for: Interest $ 282 $ 54 Income Taxes $ 10 $ 16 Non-cash investing and financing activities Common shares issued for conversion of debt and accrued interest $ 750 $ 9,614 Common shares issued in exchange of warrants $ — $ 1,698 Deemed dividend related to December 2023 warrant exchange $ — $ 283 Common shares issued as settlement of accrued compensation $ — $ 2,293 Common shares issued as prepayment for services $ — $ 335 Common shares issued in exchange of series 9 Preferred Stock $ — $ 4,625 Issuance of common shares for merger consideration, net of cash received $ — $ 22,637 Right-of-use asset obtained in exchange for lease liability $ — $ 394 Capital contribution - forgiveness of related party payable $ — $ 380 Deemed dividend related to series 9 Preferred Stock exchange $ — $ 231 ATM proceeds withheld as payment towards accounts payable $ — $ 128 Series 9 Preferred Stock dividend accrued $ — $ 496 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Nature of Business On March 12, 2024 (the “Closing Date”), XTI Aerospace, Inc., the “Company”, formerly known as Inpixon (“Legacy Inpixon”), Superfly Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Legacy Inpixon, and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”), completed their previously announced merger transaction (the “XTI Merger”). The Company is primarily an aircraft development company. As of November 10, 2025, and through the Company’s wholly-owned subsidiary, XTI Drones, LLC, the Company offers drone distribution and technology solutions via its recent acquisitions of Drone Nerds, LLC and Anzu Robotics, LLC (see Note 19 “Subsequent Events”). The Company also provides real-time location systems (“RTLS”) for the industrial sector, which was Legacy Inpixon’s focus prior to the closing of the XTI Merger. Headquartered in Englewood, Colorado, the Company is developing a vertical takeoff and landing (“VTOL”) airplane that is designed to take off and land like a helicopter and cruise like a fixed-wing business airplane. The Company believes its initial configuration, the TriFan 600 airplane, will be one of the first civilian fixed-wing VTOL airplanes that offers the speed and comfort of a business airplane and the range and versatility of VTOL for a wide range of customer applications, including private aviation for business and high net worth individuals, emergency medical services and regional charter air travel, defining a new category of VTOL that the Company terms the “xVTOL.” The TriFan 600 is a seven-occupant airplane intended to provide point-to-point air travel over distances of over 1,000 miles, fly at twice the speed and three times the range of competing helicopters and cruise at altitudes of up to 25,000 feet. Since 2013, the Company has been engaged primarily in developing the aerodynamic performance and top-level engineering design of the TriFan 600, building and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors to enable the Company to advance the detailed design and certification of the TriFan 600, and to eventually engage in commercial production and sale of the TriFan 600 airplane. The Company’s RTLS solutions leverage cutting-edge technologies such as Internet of Things (“IoT”), AI, and big data analytics to provide real-time tracking and monitoring of assets, machines, and people within industrial environments. With the Company’s RTLS solutions, businesses can achieve improved operational efficiency, enhanced safety and reduced costs. By having real-time visibility into operations, industrial organizations can make informed, data-driven decisions, minimize downtime, and ensure compliance with industry regulations. Note 2 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results for the full year ending December 31, 2025. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes for the years ended December 31, 2024 and 2023 included in the annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025. 8 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Summary of Significant Accounting Policies The Company’s complete accounting policies are described in Note 3 to the Company’s audited consolidated financial statements and notes for the year ended December 31, 2024. Liquidity As of September 30, 2025, the Company had cash and cash equivalents of approximately $ 32.2 million. For the nine months ended September 30, 2025, the Company had a net loss of approximately $ 47.2 million. During the nine months ended September 30, 2025, the Company used approximately $ 30.4 million of cash for operating activities. As of September 30, 2025, the Company’s net working capital was approximately $ 1.1 million, representing an increase of approximately $ 9.9 million from December 31, 2024. There can be no assurances that the Company will ever earn revenues sufficient to support its operations, or that it will ever be profitable. In order to continue its operations, the Company has supplemented the revenues it earned with proceeds from the sale of its equity securities and proceeds from loans. The Company’s recurring losses and utilization of cash in its operations are indicators of going concern issues. However, the Company’s current liquidity position was favorably impacted by the cash raised through equity offerings and cash received from warrant exercises aggregating approximately $ 62.8 million during the nine months ended September 30, 2025, along with repaying and settling certain debt and other obligations during March 2025. The impact of these financings and warrant exercises to the Company’s cash position and overall net working capital position, along with the Company’s ability to defer or eliminate certain operating expenses that are under its control and the revenues expected to be generated by the Industrial IoT segment lead the Company to believe it has the ability to mitigate such concerns for a period of at least one year from the date these financial statements are issued. Consolidations The condensed consolidated financial statements have been prepared using the accounting records of Legacy XTI and as of March 12, 2024 (the effective date of the XTI Merger) and forward, the accounting records of XTI Aerospace, Inc. (formerly known as Inpixon) and its subsidiaries, including Inpixon GmbH (formerly known as Nanotron Technologies GmbH), Inpixon Holding UK Limited, and Intranav GmbH. All material inter-company balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of: ● the valuation of stock-based compensation; ● the valuation of the Company’s common stock issued and assets acquired in transactions, including acquisitions; ● the valuation of convertible notes receivable; ● the valuation of convertible notes payable, at fair value; ● the valuation of goodwill and intangible assets; ● the valuation of warrant liabilities; and ● the valuation allowance for deferred tax assets. 9 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Credit Risk and Concentrations Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents. The Company maintains its cash and cash equivalents primarily with high-credit-quality financial institutions in the United States and Germany. Cash balances maintained with financial institutions in the United States are generally in excess of federally insured limits. The Company mitigates its credit risk by limiting its exposure to any single financial institution and by monitoring the credit quality of its counterparties. The Company places its cash with financial institutions that have long-term credit ratings of at least A- or equivalent, as assigned by major credit rating agencies. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for credit losses. The customers who account for 10% or more of the Company’s revenue or 10% or more of the Company’s outstanding accounts receivable balance are presented as follows for the periods indicated: Percentage of revenues For the three months ended September 30, For the nine months ended September 30, Percentage of accounts receivable Customer 2025 2024 2025 2024 As of September 30, 2025 As of December 31, 2024 A 45 % 25 34 % 23 % 49 % 31 % B 15 % ** 13 % ** ** ** C 10 % 25 % 13 % 16 % 16 % 22 % D ** ** 10 % ** 11 % ** E ** ** ** ** 10 % ** ** Represents less than 10% of the total for the respective period. The vendors who account for 10% or more of the Company’s purchases or 10% or more of the Company’s outstanding payable balance are presented as follows for the periods indicated: Percentage of purchases For the three months ended September 30, For the nine months ended September 30, Percentage of accounts payable Vendor 2025 2024 2025 2024 As of September 30, 2025 As of December 31, 2024 A 11 % ** ** ** ** ** B ** ** ** ** 18 % ** C ** ** ** ** 14 % ** D ** ** ** ** 25 % 11 % E ** ** ** ** ** 31 % ** Represents less than 10% of the total for the respective period . 10 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Intangible Assets and Goodwill Finite-lived intangible assets primarily consist of developed technology, patents, customer relationships, and trade names/trademarks. They are amortized ratably over a range of 5 to 15 years, which approximates customer attrition rate and technology obsolescence. The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches. For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, the Company uses internal analyses based primarily on market comparables. The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations. The Company reviews its long-lived assets, inclusive of its right-of-use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition. If the carrying amount of an asset group exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value. 11 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the nine months ended September 30, 2025, the Company determined that its long-lived assets were impaired by approximately $ 0.6 million. For the nine months ended September 30, 2025, the Company determined that its goodwill was impaired by approximately $ 4.05 million. There was no impairment recorded for the three months ended September 30, 2025 or 2024. Recently Adopted Accounting Standards No new accounting standards were adopted in the nine months ended September 30, 2025. Recently Issued Accounting Standards Not Yet Adopted In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, which includes amendments to require the disclosure of certain specific costs and expenses that are included in a relevant expense caption on the face of the income statement. Specific costs and expenses that would be required to be disclosed include: purchases of inventory, employee compensation, depreciation and intangible asset amortization. Additionally, a qualitative description of other items is required, equal to the difference between the relevant expense caption and the separately disclosed specific costs. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, and are applied either prospectively or retrospectively at the option of the Company. The Company is evaluating the impact of the amendments on our condensed consolidated financial statements and disclosures. In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company for annual periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-09 on our consolidated financial statements and disclosures. 12 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Disaggregation of Revenue and Deferred Revenue Disaggregation of Revenue The Company recognizes revenue when control is transferred of the promised products or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company derives revenue from software as a service, design and implementation services for its Indoor Intelligence systems, and professional services for work performed in conjunction with its systems recognition policy. Revenues consisted of the following (in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Recurring revenue Software $ 374 $ 327 $ 1,079 $ 697 Total recurring revenue $ 374 $ 327 $ 1,079 $ 697 Non-recurring revenue Hardware $ 1,735 $ 422 $ 2,091 $ 1,190 Software $ 226 $ 77 $ 231 $ 82 Professional services $ 149 $ 92 $ 167 $ 200 Total non-recurring revenue $ 2,110 $ 591 $ 2,489 $ 1,472 Total Revenue $ 2,484 $ 918 $ 3,568 $ 2,169 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Revenue recognized at a point in time Industrial IoT (1) $ 1,961 $ 499 $ 2,322 $ 1,272 Total $ 1,961 $ 499 $ 2,322 $ 1,272 Revenue recognized over time Industrial IoT (2) (3) $ 523 $ 419 $ 1,246 $ 897 Total $ 523 $ 419 $ 1,246 $ 897 Total Revenue $ 2,484 $ 918 $ 3,568 $ 2,169 (1) Hardware and Software’s performance obligation is satisfied at a point in time when they are shipped to the customer. (2) Professional services are also contracted on the fixed fee and time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date, in which revenue is recognized over time. (3) Software As A Service Revenue’s performance obligation is satisfied evenly over the service period using a time-based measure because the Company is providing continuous access to its service and revenue is recognized over time. 13 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Deferred revenue As of September 30, 2025 and December 31, 2024, the Company had approximately $ 0.7 million and $ 0.5 million, respectively, in deferred revenue. This deferred revenue balance relates to cash received in advance for product maintenance services and professional services provided by the Company’s technical staff. The fair value of the deferred revenue approximates the services to be rendered. The Company expects to satisfy its remaining performance obligations for these maintenance services and professional services and recognize the deferred revenue and related contract costs over the next twelve months. Note 5 - Proforma Financial Information The XTI Merger was accounted for as a reverse merger under U.S. GAAP. For financial reporting purposes, Legacy Inpixon is treated as the “acquired” company. As a result, the Company’s consolidated financial statements include the operating results of Legacy Inpixon only from March 12, 2024, the merger closing date. The following unaudited proforma financial information presents the consolidated results of operations of the Company and Legacy Inpixon for the three months and nine months ended September 30, 2024, as if the XTI Merger had occurred as of the beginning of the first period presented (January 1, 2024) instead of on March 12, 2024. The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods. The proforma financial information for the Company and Legacy Inpixon is as follows (in thousands): For the Three Months Ended September 30, 2024 For the Nine Months Ended September 30, 2024 Revenues $ 918 $ 2,676 Net loss attributable to common stockholders $ ( 4,674 ) $ ( 36,571 ) Net loss per basic and diluted common share $ ( 33.40 ) $ ( 456.99 ) Weighted average common shares outstanding: Basic and Diluted 139,944 80,026 Note 6 - Goodwill and Intangible Assets Goodwill In connection with the XTI 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 nine months ended September 30, 2025 (in thousands): Amount Beginning balance - January 1, 2025 $ 12,072 Foreign currency translation adjustment 1,137 Impairment ( 4,049 ) Ending balance – September 30, 2025 $ 9,160 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 first assessed whether there were any indicators of goodwill impairment that would require a quantitative analysis to be performed (i.e., a triggering event). The Company determined there was no triggering event during the three months ended September 30, 2025 related to the IoT reporting unit. However, a triggering event was identified by the Company during the quarter ended June 30, 2025, in the form of a current period operating and cash flow loss, a consistent history of operating losses, and the revenue results for the current period missing forecasted targets due to (i) the sales cycle to close transactions taking longer than anticipated and (ii) supply chain issues causing delays in our delivery of Nanotron product to customers. 14 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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, which concluded the carrying amount of the reporting unit exceeded its estimated fair value, indicating that the goodwill of the reporting unit was impaired. Therefore, the Company recorded an impairment loss of $ 4.05 million during the quarter ended June 30, 2025, related to its Industrial IoT reporting unit. The Company utilized an income approach to assess the fair value of the reporting unit as of June 30, 2025. The income approach considered the discounted cash flow model, considering 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 inputs for the fair value calculations of the reporting unit included a 3 % terminal growth rate and a discount rate of 29 %. Management’s estimates of projected cash flows related to the reporting unit include, but are not limited to, future earnings of the reporting unit using revenue growth rates, gross margins, and other cost assumptions consistent with the reporting unit’s historical trends, and working capital requirements and future capital expenditures necessary to fund future operations. The assumptions in the fair value measurement reflects the current market environment, industry-specific factors and company-specific factors. Intangible Assets Intangible assets as of September 30, 2025 and December 31, 2024 consisted of the following (in thousands): September 30, 2025 Gross Amount Accumulated Amortization Impairment Net Carrying Amount Remaining Weighted Average Useful Life Patents $ 468 $ ( 207 ) $ — $ 261 9.1 Trade Name/Trademarks 486 ( 191 ) ( 115 ) 180 4.4 Proprietary Technology 1,395 ( 469 ) ( 293 ) 633 5.2 Customer Relationships 137 ( 42 ) — 95 3.5 In-Process R&D 243 ( 20 ) ( 223 ) — — Totals $ 2,729 ( 929 ) $ ( 631 ) $ 1,169 5.8 December 31, 2024 Gross Amount Accumulated Amortization Impairment Net Carrying Amount Patents $ 468 $ ( 184 ) $ — $ 284 Trade Name/Trademarks 897 ( 142 ) ( 451 ) 304 Proprietary Technology 2,860 ( 326 ) ( 1,583 ) 951 Customer Relationships 684 ( 109 ) ( 473 ) 102 In-Process R&D 243 — — 243 Totals $ 5,152 $ ( 761 ) $ ( 2,507 ) $ 1,884 Amortization expense for the three and nine months ended September 30, 2025 was approximately $ 0.1 million and $ 0.2 million, respectively. Amortization expense for the three and nine months ended September 30, 2024 was approximately $ 0.2 million and $ 0.4 million, respectively. 15 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Future amortization expense on intangibles assets is anticipated to be as follows (in thousands): Year ending December 31, Amount 2025 (for 3 months) $ 58 2026 224 2027 224 2028 224 2029 173 2030 and thereafter 266 Total $ 1,169 The Company tests for impairment if a change in circumstances or the occurrence of events indicates that potential impairment exists. In accordance with ASC 360, the Company first performed a qualitative assessment to determine if there were any indicators of impairment that would require a quantitative analysis to be performed. The results of the qualitative analysis performed by the Company determined there was no triggering event during the three months ended September 30, 2025. However, a triggering event was identified by the Company during the first and second quarters of 2025, in the form of a current period operating and cash flow loss, a consistent history of operating losses, and the revenue results for the current period missing forecasted targets due to (i) the sales cycle to close transactions taking longer than anticipated and (ii) supply chain issues causing delays in our delivery of Nanotron product to customers. Based on a quantitative assessment, the Company recorded an impairment to its Trade Names & Trademarks, Proprietary Technology, and In-Process Research and Development of $ 0.1 million, $ 0.3 million, and $ 0.2 million, respectively, during the nine months ended September 30, 2025, which is included in ‘Impairment of intangible assets’ in the unaudited condensed consolidated statements of operations. These assets were part of the Company’s Industrial IoT segment. The Company assessed the fair value of the Trade Names & Trademarks, Proprietary Technology, and In-Process Research and Development 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 inputs for the fair value calculations included a 3 % terminal growth rate, discount rate of 29 %, and a royalty rate of 2 % and 10 % for Tradenames and Trademarks and Proprietary Technology, respectively. Management’s estimates of projected cash flows include, but are not limited to, future earnings of the reporting unit using revenue growth rates, gross margins, and other cost assumptions consistent with the reporting unit’s historical trends, and working capital requirements and future capital expenditures necessary to fund future operations. The assumptions in the fair value measurement reflects the current market environment, industry-specific factors and company-specific factors. As a result of the impairment, the Company assessed the remaining useful lives of the Trade Names & Trademarks and Proprietary Technology and concluded that there were no changes required. Note 7 - Other Balance Sheet Information Prepaid expenses and other current assets Prepaid expenses and other current assets as of September 30, 2025 and December 31, 2024 consisted of the following (in thousands): As of September 30, 2025 As of December 31, 2024 AVX deposit - related party $ — $ 464 Prepaid insurance 434 293 Deposits 17 88 Prepaid consulting/professional fees 192 15 Prepaid software 93 89 Other 182 69 Total prepaid expenses and other current assets $ 918 $ 1,018 16 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Accrued expenses and other current liabilities Accrued expenses and other current liabilities as of September 30, 2025 and December 31, 2024 consisted of the following (in thousands): As of September 30, 2025 As of December 31, 2024 Accrued transaction bonuses – Strategic Transaction Bonus Plan $ — $ 4,266 Accrued transaction bonuses – related party — 400 Accrued bonus and commissions 1,207 1,163 Accrued compensation and benefits 542 446 Accrued other 514 428 Total accrued expenses and other current liabilities $ 2,263 $ 6,703 Note 8 - Debt The Company’s outstanding debt consisted of the following at the periods indicated (in thousands): Short-Term Debt Maturity September 30, 2025 December 31, 2024 Promissory Note - May 1, 2024 1 5/1/2025 $ — $ 1,442 Promissory Note - May 24, 2024 1 5/24/2025 — 1,426 Unamortized Discounts — ( 211 ) Total Short-Term Debt $ — $ 2,657 Long-Term Debt SBA loan 2 6/3/2050 $ — $ 65 Total Long-Term Debt $ — $ 65 1 Promissory note paid in full during the first quarter of 2025. 2 SBA loan paid in full during the third quarter of 2025. Streeterville Debt Exchanges and Repayment During the first quarter of 2025, the Company issued an aggregate of 240,229 shares of common stock (the “Exchange Shares”) to Streeterville Capital, LLC (“Streeterville”), the holder of that certain outstanding secured promissory note of the Company issued on May 1, 2024 (the “Original Note”), at a price between $ 2.48 and $ 4.21 per share, in each case equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) in accordance with the terms and conditions of certain exchange agreements, pursuant to which the Company and Streeterville agreed to (i) partition new secured promissory notes in the form of the Original Note in the aggregate original principal amount of $ 750,000 and then cause the outstanding balance of the Original Note to be reduced by an aggregate of $ 750,000 ; and (ii) exchange the partitioned notes for the delivery of the Exchange Shares. On March 31, 2025, using the net proceeds from the March Offering (see “ March 2025 Public Offering ” disclosure in Note 9), the Company repaid the remaining obligation of approximately $ 2.7 million (which included principal, accrued interest and monitoring fees, and a 15 % prepayment penalty) in respect of the two secured promissory notes issued by the Company to Streeterville on May 1, 2024 and May 24, 2024. As a result of the repayments, Streeterville released its security interest in the stock the Company owns in Legacy XTI and the assets owned by Legacy XTI. Due to the repayment of the promissory notes occurring before the maturity date, the Company incurred a loss on extinguishment of debt of approximately $ 0.4 million, which is reported within other (expense) income on the condensed consolidated statements of operations. 17 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Common Stock Capital Raises At-the-Market (ATM) Offering Program The Company was able, from time to time, to sell shares of the Company’s common stock under its “at-the-market” offering program (the “ATM”) through Maxim Group LLC (“Maxim”), as the Company’s exclusive sales agent, up to a maximum offering amount of approximately $ 83.3 million, pursuant to that certain Equity Distribution Agreement, dated as of July 22, 2022, by and between the Company and Maxim, as amended from time to time (the “Equity Distribution Agreement”). The term of the Equity Distribution Agreement expired on December 31, 2024. Maxim was entitled to compensation at a fixed commission rate of 3.0 % of the gross sales price per share sold, excluding Maxim’s costs and out-of-pocket expenses incurred in connection with its services, including the fees and out-of-pocket expenses of its legal counsel. The Company sold 169,299 shares of common stock under the Equity Distribution Agreement at per share price of $ 10.00 , resulting in net proceeds to the Company of approximately $ 1.7 million. This sale originated on December 31, 2024 and closed in early January 2025. January 2025 Public Offering On January 7, 2025, the Company entered into a placement agency agreement with ThinkEquity LLC (“ThinkEquity”), pursuant to which the Company agreed to issue and sell directly to various investors, in a best efforts public offering (the “January Offering”), an aggregate of 1,454,546 shares of common stock at an offering price of $ 13.75 per share. The January Offering closed on January 10, 2025 resulting in net proceeds to the Company of approximately $ 18.3 million, after deducting commissions and other expenses of approximately of $ 1.7 million. March 2025 Public Offering On March 28, 2025, the Company entered into an underwriting agreement with ThinkEquity, as the representative of the underwriters named therein, relating to a firm commitment underwritten public offering (the “March Offering”) of 765,200 shares of common stock (the “Shares”), pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 2,176,000 shares of common stock, and common warrants (the “Common Warrants” and together with the Pre-funded Warrants, the “Warrants”) to purchase up to 2,941,200 shares of common stock. The combined public offering price for each Share, together with one Common Warrant, was $ 1.36 . The combined public offering price for each Pre-funded Warrant, together with one Common Warrant, was $ 1.359 . Each Share, or a Pre-funded Warrant in lieu thereof, was sold together with one Common Warrant. The March Offering closed on March 31, 2025. The net proceeds to the Company from the sale of the Shares and the Warrants were approximately $ 3.4 million, after deducting the underwriting discounts and commissions and other expenses payable by the Company of approximately $ 0.6 million. June 2025 Public Offering On June 24, 2025, the Company entered into an underwriting agreement with ThinkEquity, as the representative of the underwriters named therein, relating to a firm commitment underwritten public offering (the “June Offering”) of 6,231,200 shares of common stock (the “Shares”), pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 2,911,800 shares of common stock, and common warrants (the “Common Warrants” and together with the Pre-funded Warrants, the “Warrants”) to purchase up to 9,143,000 shares of common stock. The combined public offering price for each Share, together with one Common Warrant, was $ 1.75 . The combined public offering price for each Pre-funded Warrant, together with one Common Warrant, was $ 1.749 . Each Share, or a Pre-funded Warrant in lieu thereof, was sold together with one Common Warrant. The Company also granted ThinkEquity a 45-day option to purchase, at the public offering price, less the underwriting discounts and commissions, up to 1,371,000 additional shares of common stock (and/or Pre-funded Warrants in lieu thereof) and/or up to 1,371,000 additional Common Warrants or any combination thereof, to cover any over-allotments (the “Over-Allotment Option”). ThinkEquity partially exercised the Over-Allotment Option on June 25, 2025 for 1,371,000 additional Common Warrants. 18 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The June Offering closed on June 26, 2025. The net proceeds to the Company from the sale of the Shares and the Warrants, including the Common Warrants sold in connection with the partial exercise of the Over-Allotment Option on June 25, 2025, were approximately $ 14.7 million, after deducting the underwriting discounts and commissions and other expenses payable by the Company of approximately $ 1.3 million. During July 2025, the Company closed multiple partial exercises of the Over-Allotment Option until the Over-Allotment Option was exercised in full, resulting in the issuance of 1,371,000 shares of common stock, at the public offering price of $ 1.75 per share, for net proceeds of approximately $ 2.2 million, after deducting the underwriting discounts and commissions and other expenses payable by the Company of approximately $ 0.2 million. September 2025 Public Offering On September 12, 2025, the Company entered into a placement agency agreement with ThinkEquity, pursuant to which the Company agreed to issue and sell directly to various investors, in a best efforts public offering (the “September Offering”), 10,575,000 shares of common stock (the “Shares”), pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 1,925,000 shares of common stock, and common warrants (the “Common Warrants” and together with the Pre-funded Warrants, the “Warrants”) to purchase up to 12,500,000 shares of common stock. The combined public offering price for each Share, together with one Common Warrant, was $ 1.60 . The combined public offering price for each Pre-funded Warrant, together with one Common Warrant, was $ 1.599 . Each Share, or a Pre-funded Warrant in lieu thereof, was sold together with one Common Warrant. The September Offering closed on September 15, 2025. The net proceeds to the Company from the sale of the Shares and the Warrants were approximately $ 18.5 million, after deducting the placement agent fees and other expenses payable by the Company of approximately $ 1.5 million. Allocation of Net Proceeds The aggregate net proceeds from the January Offering, March Offering, June Offering (including exercises of the Over-Allotment Option during July 2025) and September Offering were approximately $ 57.1 million. Based on their relative fair value as of the date of issuance, the Company allocated approximately $ 20.6 million of net proceeds to the sales of common stock and approximately $ 36.5 million of net proceeds to the issuance of warrants. Other Share Issuances On May 13, 2025, the Company entered into an advisory agreement with a third-party advisor, pursuant to which the Company issued 125,000 shares of restricted common stock, subject to certain registration rights, to the advisor in consideration for financial advisory services agreed to be rendered to the Company pursuant to the advisory agreement. As a result of the share issuance, the Company recognized approximately $ 0.2 million in share-based compensation expense, which is included in general and administrative expenses on the condensed consolidated statements of operations, for the nine months ended September 30, 2025. 19 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock with a par value of $ 0.001 per share with rights, preferences, privileges and restrictions as to be determined by the Company’s Board of Directors. Series 9 Preferred Stock Redemptions On November 17, 2024, the Company entered into a Consent, Waiver and Release Agreement (the “Consent Agreement”) with Streeterville and 3AM Investments, LLC (“3AM”), an entity controlled by Nadir Ali, Legacy Inpixon’s former Chief Executive Officer and a former director of Legacy Inpixon, pursuant to which Streeterville and 3AM authorized the Company to raise up to an additional $ 5,000,000 under the ATM (the “ATM Increase”) in consideration for the Company’s agreement to pay, on a weekly basis, 20 % of the proceeds it receives from sales under the ATM in connection with the ATM Increase (the “Redemption Proceeds”) to Streeterville and 3AM to redeem a portion of their Series 9 Preferred Stock, to be distributed as follows: (i) 75 % of the Redemption Proceeds to Streeterville ( 15 % of all proceeds received from sales under the ATM), and (ii) 25 % of the Redemption Proceeds to 3AM ( 5 % of all proceeds received from sales under the ATM). As of December 31, 2024, Streeterville and 3AM held zero and 1331.12 shares of Series 9 Preferred Stock, respectively. Pursuant to the Consent Agreement, the Company delivered an aggregate of approximately $ 0.2 million to 3AM on January 5, 2025, which amount represents the Redemption Proceeds payable to 3AM in connection with amounts received by the Company on January 2, 2025 from sales under the ATM originating on December 31, 2024. Such payments were made for 167.00 shares of the Company’s Series 9 Preferred Stock held by 3AM. The Company entered into an acknowledgment agreement with 3AM to record such payment. On March 27, 2025, the Company entered into a Settlement Agreement with 3AM and other parties as further disclosed in Note 16. Pursuant to the Settlement Agreement, on the Effective Date, the Company delivered the aggregate amount of approximately $ 1.3 million (the “Series 9 Redemption Amount”) for the redemption of the outstanding Series 9 Preferred Stock. Following 3AM’s receipt of the Series 9 Redemption Amount, 3AM no longer held any shares of Series 9 Preferred Stock. As of September 30, 2025, there are no shares of Series 9 Preferred Stock issued and outstanding. 20 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Stock Award Plans and Stock-Based Compensation In 2011, Legacy Inpixon adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”). The 2011 Plan terminated by its terms on August 31, 2021 and remains in effect as to outstanding equity awards granted prior to the date of expiration. No new awards will be issued under the 2011 Plan. During 2017, Legacy XTI adopted the 2017 Employee and Consultant Stock Ownership Plan (the “2017 Plan”), which was amended in 2021 to increase the maximum shares eligible to be granted under the 2017 Plan. The Company assumed the 2017 Plan in connection with the XTI Merger. The Company may issue awards in the form of restricted stock units and stock options to employees, directors, and consultants. Under the 2017 Plan, stock options are generally granted with an exercise price equal to the estimated fair value of the Company’s common stock, as determined by the Company’s Board of Directors (the “Board”) on the date of grant. Options generally have contractual terms of ten years . Incentive stock options (ISO) may only be granted to employees, whereas all other stock awards may be granted to employees, directors, consultants and other key stakeholders. As of September 30, 2025, there are no shares available for future grants under the 2017 Plan. In February 2018, Legacy Inpixon adopted the 2018 Plan, which is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan). In August 2025, the Board approved the amendment and restatement of the 2018 Plan which, among other things, provides that the Board may authorize one or more of the Company’s officers to grant awards pursuant to the 2018 Plan, provided that the Board must specify the total number of shares of common stock that may be subject to the awards granted by such officer. As of September 30, 2025, there are no unvested Restricted Stock or Restricted Stock Units outstanding under the 2018 Plan. Incentive stock options granted under the 2018 Plan are granted at exercise prices at a minimum of 100 % of the estimated fair market value of the underlying common stock at date of grant. For any individual possessing more than 10 % of the total outstanding common stock of the Company, the exercise price per share for incentive stock options is a minimum 110 % of the estimated fair value of the underlying common stock on the grant date. Options granted under the 2018 Plan vest over periods ranging from immediately to four years and are exercisable over periods up to ten years from the grant date. The aggregate number of shares that may be awarded under the 2018 Plan as of September 30, 2025 was 77,105,687 . As of September 30, 2025, 10,714,289 stock options were granted to employees, directors and consultants of the Company and 62,240,174 options were available for future grant under the 2018 Plan. 21 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS See below for a summary of the stock options granted under the 2011, 2017 and 2018 plans: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In millions) Beginning balance as of January 1, 2025 51,185 $ 455.00 9.3 $ — Granted 10,668,256 1.95 Exercised — Expired — Forfeited ( 2,485 ) 2,476.56 Ending balance as of September 30, 2025 10,716,956 $ 3.54 9.9 $ — Options vested and exercisable as of September 30, 2025 3,654,641 $ 4.63 9.9 $ — The compensation committee of the Board approved awards of options to certain Company executives under the 2018 Plan. Each option has an exercise price of $ 2.00 per share. The options vested 1/3 rd on the grant date with the remaining 2/3 rd vesting in equal quarterly installments over two years starting from the grant date. The options expire ten years from the grant date. Options were granted as follows: Grantee Grant Date Vesting Start Date Options Granted Chief Executive Officer of XTI Aerospace, Inc. 9/4/2025 9/4/2025 2,621,100 Chief Financial Officer of XTI Aerospace, Inc. 9/4/2025 9/4/2025 1,512,200 Chief Executive Officer of the XTI Aerospace, Inc. Real-Time Location System Division 9/4/2025 9/4/2025 78,000 Chief Operating Officer of XTI Aerospace, Inc. 9/4/2025 9/4/2025 1,613,000 Chief Strategy Officer of XTI Aerospace, Inc. 9/4/2025 9/4/2025 1,512,200 Total Granted 7,336,500 The measurement of fair value of options is determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance. The following assumptions were used in estimating the fair values of options awarded during the nine months ended September 30, 2025: Fair value of common stock $ 1.50 - $ 2.00 Exercise price $ 1.50 - $ 2.00 Expected term 5.47 years Volatility 98.91 % - 99.42 % Risk-free interest rate 3.62 % - 3.71 % Dividend yield — % 22 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Stock-based Compensation Expense The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award. The Company measures compensation expense for its non-employee stock-based compensation under ASC 718, “Stock-Based Compensation”. The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock or stock award on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The Company incurred the following stock-based compensation charges for the periods indicated below (in thousands): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Employee and consultant stock options 1 $ 6,301 $ ( 2,159 ) $ 7,234 $ ( 2,075 ) Vesting of previously unvested warrants 2 — — — 270 Professional fees 2 49 270 293 496 Merger-related professional fees — — — 5,153 Total $ 6,350 $ ( 1,889 ) $ 7,527 $ 3,844 1 Amount included in general and administrative expenses on the condensed consolidated statements of operations. 2 Amount included in merger-related transaction costs on the condensed consolidated statements of operations for the three and nine months ended September 30, 2024. Amount included in general and administrative expenses on the condensed consolidated statements of operations for the three and nine months ended September 30, 2025. As of September 30, 2025, the total unrecognized compensation expense related to unvested awards was approximately $ 14.0 million, which the Company expects to recognize over an estimated weighted average period of 1.71 years. 23 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 12 - Warrants The following table summarizes the activity of warrants outstanding: Number of Warrants Beginning balance as of January 1, 2025 1,128 Granted 34,338,488 Exercised ( 8,039,000 ) Expired — Exchanged — Ending balance as of September 30, 2025 26,300,616 Exercisable as of September 30, 2025 26,299,859 The weighted average exercise price of warrants outstanding as of September 30, 2025 was $ 2.77 . The weighted average exercise price of exercisable warrants outstanding as of September 30, 2025 was $ 2.77 . Warrants Granted January 2025 Public Offering As part of its compensation for acting as placement agent for the January Offering (refer to Note 9), the Company issued ThinkEquity warrants (the “Placement Agent Warrants”) to purchase 72,727 shares of common stock. The Placement Agent Warrants are exercisable commencing January 10, 2025 , expire January 8, 2030 and have an exercise price of approximately $ 17.1875 per share. The Placement Agent Warrants are classified as a contingently redeemable warrant in accordance with ASC 718, since these warrants did qualify for equity classification, but could be settled in cash or other assets in the event that another person or entity becomes the beneficial owner of 50 % of the outstanding shares of the Company’s common stock. Because this contingently redeemable feature could result in the warrant holders receiving additional compensation not on par with the holders of common stock, the Placement Agent Warrants were classified as temporary equity and therefore reported in “Mezzanine Equity” on the Company’s condensed consolidated balance sheets as of September 30, 2025. The measurement of fair value of the warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 7.31 , exercise price of $ 17.1875 , term of five years, volatility of 98 %, risk-free rate of 4.6 %, and expected dividend rate of 0 %). The proceeds of the January Offering were allocated to each of the warrants and the common stock based on their relative fair value. 24 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The grant date fair value of the warrants and shares of common stock on January 10, 2025 is summarized below and is reflected as temporary equity for the warrants and within additional paid-in capital for the common stock as of September 30, 2025. Instrument Grant Date Fair Value Common stock $ 19,663,008 Placement Agent Warrants $ 337,000 March 2025, June 2025 and September 2025 Public Offerings As part of the March Offering, June Offering and September Offering (refer to Note 9), the Company issued pre-funded warrants (the “Pre-funded Warrants”) to purchase up to an aggregate of 7,012,800 shares of common stock, and common warrants (the “Common Warrants”) to purchase up to an aggregate of 25,955,200 shares of common stock. Each Pre-funded Warrant was immediately exercisable upon issuance, has an exercise price of $ 0.001 per share and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. Each Common Warrant was immediately exercisable upon issuance and expires on the fifth anniversary of the date of issuance. The Common Warrants issued in connection with the March Offering have an exercise price of $ 1.36 . The Common Warrants issued in connection with the June Offering and the September Offering have an exercise price of $ 2.00 . Upon closing of the March Offering and June Offering, the Company issued ThinkEquity, as partial compensation, warrants (the “Representative’s Warrants”) to purchase up to 147,060 and 457,150 shares of common stock, respectively. The Representative’s Warrants issued in connection with the March Offering and June Offering have an exercise price of $ 1.70 and $ 2.1875 per share, respectively. Upon closing of the September Offering, the Company issued ThinkEquity, as partial compensation, warrants (the “Placement Agent Warrants”) to purchase up to 625,000 shares of common stock at an exercise price of $ 2.00 per share. The Representative’s Warrants and the Placement Agent Warrants are exercisable, in whole or in part, immediately upon issuance until the five-year anniversary of the commencement of sales of securities in the March Offering, June Offering and September Offering, respectively. In connection with closing multiple exercises of the Over-Allotment Option during July 2025 (refer to Note 9), the Company issued ThinkEquity additional Representative’s Warrants to purchase an aggregate of 68,551 shares of common stock at an exercise price of $ 2.1875 per share with the same terms as the Representative’s Warrants issued in connection with the initial closing of the June Offering. The grant date fair value of the additional Representative’s Warrants was determined to be approximately $ 94,000 . Similar to the Placement Agent Warrants issued to ThinkEquity in connection with January Offering, as described above in this note section, the Representative’s Warrants and the Placement Agent Warrants issued in connection with the March Offering, June Offering and September Offering were determined to be temporary equity under ASC 718 and therefore reported in “Mezzanine Equity” on the Company’s condensed consolidated balance sheets. The Common Warrants and Pre-funded Warrants issued in connection with the March Offering, June Offering and September Offering were determined to be liability classified. The Common Warrants and Pre-funded Warrants were recognized at fair value at issuance, with a gain in change in fair value of approximately $ 2.2 million in the three months ended September 30, 2025 and a loss of $ 3.3 million for the nine months ended September 30, 2025 reported in “change in fair value of warrant liability” on the Company’s condensed consolidated statements of operations. The measurement of fair value of the Representative’s Warrants issued in connection with the March Offering was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 1.09 , exercise price of $ 1.70 , term of five years, volatility of 103 %, risk-free rate of 4 %, and expected dividend rate of 0 %). The measurement of fair value of the Common Warrants issued in connection with the March Offering was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 1.09 , exercise price of $ 1.36 , term of five years, volatility of 103 %, risk-free rate of 4 %, and expected dividend rate of 0 %). 25 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The measurement of fair value of the Representative’s Warrants issued in connection with the June Offering was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 1.66 , exercise price of $ 2.1875 , term of five years, volatility of 106 %, risk-free rate of 3.8 %, and expected dividend rate of 0 %). The measurement of fair value of the Common Warrants issued in connection with the June Offering was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 1.66 , exercise price of $ 2.00 , term of five years, volatility of 106 %, risk-free rate of 3.8 %, and expected dividend rate of 0 %). The measurement of fair value of the Placement Agent Warrants and Common Warrants issued in connection with the September Offering was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 1.51 , exercise price of $ 2.00 , term of five years, volatility of 109 %, risk-free rate of 3.6 %, and expected dividend rate of 0 %). The March Offering, June Offering and September Offering proceeds were allocated to each of the warrants and the common stock based on their relative fair value. The grant date fair value of the warrants and shares of common stock on March 31, 2025 (March Offering), June 26, 2025 (June Offering) and September 15, 2025 (September Offering) is summarized below in the aggregate and is reflected as temporary equity (“Mezzanine Equity”) for the Representative’s Warrants and Placement Agent Warrants, a warrant liability for the Common Warrants and Pre-funded Warrants, and within additional paid-in capital for the common stock as of September 30, 2025. Instrument Grant Date Fair Value March Offering Grant Date Fair Value June Offering Grant Date Fair Value September Offering Total Common stock $ 765 $ 6,231 10,575 $ 17,571 Warrants: Pre-funded Warrants $ 2,957,949 $ 5,092,738 $ 3,078,075 $ 11,128,762 Representative’s Warrants and Placement Agent Warrants $ 115,000 $ 572,000 $ 722,000 $ 1,409,000 Common Warrants $ 2,395,000 $ 13,334,000 $ 14,445,000 $ 30,174,000 Total Fair Value of Warrants Issued $ 5,467,949 $ 18,998,738 $ 18,245,075 $ 42,711,762 Given that the aggregate gross proceeds of approximately $ 20.0 million from the March Offering (approximately $ 4.0 million) and June Offering (approximately $ 16.0 million) was less than the total fair value of the warrants issued, the Company recorded a loss on excess fair value at issuance of approximately $ 4.5 million for the nine months ended September 30, 2025, which is reported in “warrant issuance expense” on the Company’s condensed consolidated statements of operations. Given that the gross proceeds of $ 20.0 million from the September Offering exceeded the total fair value of the warrants issued, the Company did not record a loss during the three months ended September 30, 2025. In addition, an aggregate of $ 0.8 million and $ 2.1 million of underwriting discounts and commissions and other expenses relating to the March Offering, June Offering and September Offering were allocated, based on the fair value at the time of issuance, to the warrant instruments for the three and nine months ended September 30, 2025, respectively, which is reported in “warrant issuance expense” on the Company’s condensed consolidated statements of operations. 26 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Warrants Exercised During the nine months ended September 30, 2025, 2,176,000 Pre-funded Warrants from the March Offering were exercised at an exercise price per share of $ 0.001 , resulting in the issuance of 2,176,000 shares of common stock and cash proceeds to the Company of $ 2,176 . During the nine months ended September 30, 2025, 2,884,500 Common Warrants from the March Offering were exercised at an exercise price per share of $ 1.36 , resulting in the issuance of 2,884,500 shares of common stock and cash proceeds to the Company of approximately $ 3.9 million. As of September 30, 2025, there were no Pre-funded Warrants and 56,700 Common Warrants outstanding from the March Offering. During the nine months ended September 30, 2025, 2,911,800 Pre-funded Warrants from the June Offering were exercised at an exercise price per share of $ 0.001 , resulting in the issuance of 2,911,800 shares of common stock and cash proceeds to the Company of $ 2,912 . During the nine months ended September 30, 2025, 66,700 Common Warrants from the June Offering were exercised at an exercise price per share of $ 2.00 , resulting in the issuance of 66,700 shares of common stock and cash proceeds to the Company of approximately $ 0.1 million. As of September 30, 2025, there were no Pre-funded Warrants and 10,447,330 Common Warrants outstanding from the June Offering. Note 13 - Segments The Company’s Chief Executive Officer, acting as the Chief Operating Decision Maker (“CODM”), regularly reviews and manages certain areas of its businesses , resulting in the Company identifying two reportable segments: Industrial IoT and Commercial Aviation. The Company manages and reports its operating results through these two reportable segments. This allows the Company to enhance its customer focus and better align its business models, resources, and cost structure to the specific current and future growth drivers of each business, while providing increased transparency to the Company’s shareholders. The Commercial Aviation segment is currently in the pre-revenue development stage and its primary activity is the development of the TriFan 600 airplane. The Industrial IoT segment generates revenue primarily from the sale of real-time location system solutions for the industrial sector and its customers are primarily located in Germany and the U.S. As it relates to the Industrial IoT segment, the results disclosed in the table below only reflect activity following the XTI Merger closing through the September 30, 2025 reporting date. Information on each of our reportable segments and reconciliation to consolidated loss from operations is presented in the table below. We have assigned certain previously reported expenses to each segment to conform to the way we internally manage and monitor our business. Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included expenses incurred for administrative and accounting staff, general liability and other insurance, accrued consulting fees and transaction bonuses relating to former Legacy Inpixon executives, professional fees and other similar corporate expenses. The following tables reflect the results of operations from our business segments for the periods indicated below (in thousands): Three Months Ended September 30, 2025 Industrial Commercial Unallocated IoT Aviation Costs Total Revenue $ 2,484 $ — $ — $ 2,484 Cost of revenues 1,407 — — 1,407 Gross Profit 1,077 — — 1,077 Operating expenses Research and development 536 1,449 — 1,985 Sales and marketing 669 847 1,225 2,741 General and administrative 792 283 10,031 11,106 Impairment of goodwill — — — — Impairment of intangible assets — — — — Other expenses (1) 43 8 3 54 Total operating expenses 2,040 2,587 11,259 15,886 Loss from operations $ ( 963 ) $ ( 2,587 ) $ ( 11,259 ) $ ( 14,809 ) 27 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Nine Months Ended September 30, 2025 Industrial Commercial Unallocated IoT Aviation Costs Total Revenue $ 3,568 $ — $ — $ 3,568 Cost of revenues 1,673 — — 1,673 Gross Profit 1,895 — — 1,895 Operating expenses Research and development 1,696 3,953 — 5,649 Sales and marketing 1,986 1,180 2,101 5,267 General and administrative 1,849 970 19,615 22,434 Impairment of goodwill 4,049 — — 4,049 Impairment of intangible assets 631 — — 631 Other expenses (1) 148 24 34 206 Total operating expenses 10,359 6,127 21,750 38,236 Loss from operations $ ( 8,464 ) $ ( 6,127 ) $ ( 21,750 ) $ ( 36,341 ) (1) Other expenses include amortization of intangibles. Three Months Ended September 30, 2024 Industrial Commercial Unallocated IoT Aviation Costs Total Revenue $ 918 $ — $ — $ 918 Cost of revenues 398 — — 398 Gross Profit 520 — — 520 Operating expenses Research and development 609 619 — 1,228 Sales and marketing 472 29 518 1,019 General and administrative 615 ( 2,444 ) 4,122 2,293 Other expenses (2) 136 8 52 196 Total operating expenses 1,832 ( 1,788 ) 4,692 4,736 Income (loss) from operations $ ( 1,312 ) $ 1,788 $ ( 4,692 ) $ ( 4,216 ) Nine Months Ended September 30, 2024 Industrial Commercial Unallocated IoT Aviation Costs Total Revenue $ 2,169 $ — $ — $ 2,169 Cost of revenues 846 — — 846 Gross Profit 1,323 — — 1,323 Operating expenses Research and development 1,361 1,479 — 2,840 Sales and marketing 1,187 295 678 2,160 General and administrative 1,268 ( 1,125 ) 16,279 16,422 Other expenses (2) 295 6,512 114 6,921 Total operating expenses 4,111 7,161 17,071 28,343 Loss from operations $ ( 2,788 ) $ ( 7,161 ) $ ( 17,071 ) $ ( 27,020 ) (2) Other expenses include merger-related transaction costs and amortization of intangibles. The reporting package provided to the Company’s CODM does not include the measure of assets by segment as that information is not reviewed by the CODM when assessing segment performance or allocating resources. 28 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 14 - Fair Value Measurements and Fair Value of Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and warrant liability. Cash and cash equivalents, accounts receivable and accounts payable are stated at their respective carrying amounts, which approximate fair value due to their short-term nature. The Company’s assets and liabilities measured at fair value consisted of the following at the periods indicated: Fair Value at September 30, 2025 Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 28,228 $ — $ — $ 28,228 Total liabilities $ 28,228 $ — $ — $ 28,228 The fair value of the Level 3 warrant liability was determined by using a pricing model with certain significant unobservable market data inputs (refer to Note 12). The table below provides a summary of changes in the estimated fair value of the Company’s Level 3 warrant liability: Warrant Liability Balance as of January 1, 2025 $ — Pre-funded and Common Warrants issued in connection with the March Offering (Note 12) 5,353 Pre-funded and Common Warrants issued in connection with the June Offering (Note 12) 18,427 Pre-funded and Common Warrants issued in connection with the September Offering (Note 12) 17,523 Exercise of warrants ( 16,355 ) Change in fair value 3,280 Balance as of September 30, 2025 $ 28,228 The change in fair value of the warrant liability is presented within “Change in fair value of warrant liability” on the condensed consolidated statements of operations. 29 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 15 - Foreign Operations Prior to the XTI Merger, the Company’s operations were located primarily in the United States. After the XTI Merger, the Company’s operations are located primarily in the United States, Germany, and the United Kingdom. Revenues by geographic area are attributed by the country of domicile of our subsidiaries. The financial data by geographic area are as follows (in thousands): United States Germany United Kingdom Eliminations Total For the Three Months Ended September 30, 2025: Revenues by geographic area $ 750 $ 1,873 $ — $ ( 139 ) $ 2,484 Operating loss by geographic area $ ( 14,125 ) $ ( 684 ) $ — $ — $ ( 14,809 ) Net loss by geographic area $ ( 12,761 ) $ ( 685 ) $ — $ — $ ( 13,446 ) For the Three Months Ended September 30, 2024: Revenues by geographic area $ 435 $ 622 $ — $ ( 139 ) $ 918 Operating loss by geographic area $ ( 3,167 ) $ ( 1,049 ) $ — $ — $ ( 4,216 ) Net loss by geographic area $ ( 3,389 ) $ ( 1,046 ) $ — $ — $ ( 4,435 ) For the Nine Months Ended September 30, 2025: Revenues by geographic area $ 1,348 $ 2,637 $ — $ ( 417 ) $ 3,568 Operating loss by geographic area $ ( 29,929 ) $ ( 6,410 ) $ ( 2 ) $ — $ ( 36,341 ) Net loss by geographic area $ ( 40,774 ) $ ( 6,400 ) $ ( 2 ) $ — $ ( 47,176 ) For the Nine Months Ended September 30, 2024: Revenues by geographic area $ 758 $ 1,689 $ — $ ( 278 ) $ 2,169 Operating loss by geographic area $ ( 25,146 ) $ ( 1,874 ) $ — $ — $ ( 27,020 ) Net loss by geographic area $ ( 19,886 ) $ ( 1,861 ) $ — $ — $ ( 21,747 ) As of September 30, 2025: Identifiable assets by geographic area $ 79,565 $ 19,451 $ — $ ( 51,085 ) $ 47,931 Long lived assets by geographic area $ 754 $ 900 $ — $ — $ 1,654 Goodwill by geographic area $ 2,227 $ 6,933 $ — $ — $ 9,160 As of December 31, 2024: Identifiable assets by geographic area $ 44,198 $ 19,763 $ 11 $ ( 39,681 ) $ 24,291 Long lived assets by geographic area $ 1,053 $ 1,377 $ — $ — $ 2,430 Goodwill by geographic area $ 3,142 $ 8,930 $ — $ — $ 12,072 30 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 16 - Related Party Transactions Consulting Agreement with David Brody David Brody, board member and founder of Legacy XTI, provided legal and strategic consulting services to Legacy XTI under a consulting agreement between Legacy XTI and Mr. Brody. Pursuant to an amendment to the consulting agreement entered into in January 2024, an outstanding payable amount of $ 320,000 was waived by Mr. Brody, and the consulting agreement terminated in connection with the closing of the XTI Merger. This forgiveness of a related party payable was accounted for as a capital contribution on the condensed consolidated statement of changes in stockholders’ equity. During the nine months ended September 30, 2024, Legacy XTI paid Mr. Brody consulting compensation of $ 20,000 . Consulting Agreement with Scott Pomeroy Scott Pomeroy and Legacy XTI entered into a consulting agreement dated July 1, 2022, as amended effective January 1, 2023, that provided for his engagement as Legacy XTI’s Chief Financial Officer. The agreement provided that Mr. Pomeroy receive a monthly compensation of $ 17,500 . Pursuant to the consulting agreement and in connection with the closing of the XTI Merger in March 2024, Mr. Pomeroy (i) received 4,000,000 shares (pre-merger, pre-reverse stock splits) of Legacy XTI common stock valued at $ 1.9 million as transaction-related compensation and (ii) was entitled to receive a transaction cash bonus of $ 400,000 . The transaction cash bonus obligation remained outstanding as of December 31, 2024 and was included in accrued expenses and other current liabilities on the accompanying consolidated balance sheets. This cash bonus obligation was subsequently paid in full during January 2025. Effective upon closing time of the XTI Merger, Mr. Pomeroy was appointed as XTI Aerospace’s Chief Executive Officer (“CEO”). As the consulting agreement was terminated upon Mr. Pomeroy’s appointment as the Company’s CEO on March 12, 2024, no consulting compensation was accrued or paid to Mr. Pomeroy during the three months ended September 30, 2025 and 2024. During the nine months ended September 30, 2025 and 2024, the Company paid Mr. Pomeroy consulting compensation of $ 0 and $ 43,750 , respectively. Transactions with AVX Aircraft Company On August 27, 2024, the Company entered into an amended and restated letter agreement with AVX Aircraft Company (“AVX”), which amends and restates the original letter agreement, dated as of March 25, 2024, by and between the Company and AVX, as subsequently amended, pursuant to which AVX provides consulting and advisory services to the Company relating to the development and design of the TriFan 600 airplane in exchange for the payment of costs incurred by AVX (with a target cost of approximately $ 960,000 ) plus a fixed fee of 12 % of such costs (approximately $ 115,000 ) for a total payment of up to approximately $ 1.1 million. The Company pays AVX for its actual costs plus the 12 % fixed fee on a monthly basis. The Company’s Chairman and Chief Executive Officer, Scott Pomeroy, and board member, David Brody, also sit on the five-member board of AVX. Additionally, as of the date of this report, Mr. Brody and his spouse together own approximately 26 % of the issued and outstanding shares of AVX. As a result of a legal financial separation between Mr. Brody and his spouse, Mr. Brody holds approximately 7 % of the voting power of the outstanding securities of AVX and Mr. Brody’s spouse holds approximately 19 % of the voting power of the outstanding securities of AVX. As of the date of this report, Mr. Pomeroy owns restricted stock units of AVX which amount to less than 5 % of the outstanding shares of AVX on a fully diluted basis. During the nine months ended September 30, 2025, the Company did not accrue or pay AVX any consulting fees. During the year ended December 31, 2024, the Company paid AVX approximately $ 0.9 million in consulting fees, which included advance deposits for future services. As of December 31, 2024, the deposit balance for future services was approximately $ 0.5 million and is included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets. In April 2025, the deposit balance of approximately $ 0.5 million was returned to the Company. As of the date of this report, neither Mr. Brody nor Mr. Pomeroy has received, and neither is entitled to receive, any compensation or other consideration from AVX, in connection with services provided by AVX to the Company or otherwise. On April 18, 2025, XTI Aircraft Company entered into a novation agreement with AVX and a recruiting firm, pursuant to which AVX assigned to XTI Aircraft Company all of AVX’s rights and obligations under a talent acquisition engagement agreement with the recruiting firm and, as a result, the recruiting firm assisted XTI Aircraft Company in hiring an executive for fees of approximately $ 0.1 million, which were incurred subsequent to September 30, 2025. Agreements with Nadir Ali On March 12, 2024, the Company entered into a consulting agreement with Nadir Ali (the “Ali Consulting Agreement”), the Company’s former Chief Executive Officer. Mr. Ali, through 3AM, held shares of the Company’s Series 9 Preferred Stock as disclosed in Note 10. 31 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS During the three months ended September 30, 2025 and 2024, the Company recognized compensation expense of $ 0 and approximately $ 1.0 million, respectively, which is included in general and administrative expenses on the condensed consolidated statements of operations, relating to the Ali Consulting Agreement. During the nine months ended September 30, 2025 and 2024, the Company recognized compensation expense of approximately $ 2.3 million and $ 2.6 million, respectively, which is included in general and administrative expenses on the condensed consolidated statements of operations, relating to the Ali Consulting Agreement. As of December 31, 2024, the Company owed Mr. Ali accrued consulting fees of approximately $ 0.2 million, which is included in accounts payable on the accompanying consolidated balance sheets. Pursuant to the Settlement Agreement (see “ Settlement Agreement ” below in this note), as of September 30, 2025, the Company owed Mr. Ali accrued consulting fees of $ 0.5 million, which is included in accounts payable on the accompanying condensed consolidated balance sheets. On July 24, 2023, the compensation committee of the Board of Legacy Inpixon adopted a Strategic Transaction Bonus Plan, which was amended on March 11, 2024 (the “Strategic Transaction Bonus Plan”), and was intended to provide incentives to certain employees, including Mr. Ali, and other service providers to remain with the Company through the consummation of a qualifying transaction. As of December 31, 2024, the Company had a transaction bonus obligation of approximately $ 2.1 million payable to Mr. Ali, which is included in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. On March 31, 2025, the Company repaid the remaining transaction bonus obligation to Mr. Ali pursuant to the Settlement Agreement (see “ Settlement Agreement ” below in this note). Settlement Agreement On March 27, 2025 (the “Effective Date”), the “Company entered into a settlement agreement (the “Settlement Agreement”) with 3AM, Grafiti Group LLC (“Grafiti Group”) and Nadir Ali. The terms of the Settlement Agreement include: ● Termination of Ali Consulting Agreement. The Settlement Agreement provides that effective as of the Effective Date, the Ali Consulting Agreement was terminated, and in lieu of the $ 2,775,000 (the “Ali Advisory Fees”) that would be owed to Mr. Ali pursuant to the terms of the Ali Consulting Agreement as a result of the termination of such Ali Consulting Agreement prior to the 15 month anniversary of the effective date thereof, the Company agreed (i) that the aggregate amount of $ 1,000,000 (the “Grafiti Purchase Amount”) required to be delivered by Grafiti Group pursuant to that certain Equity Purchase Agreement, dated February 16, 2024, by and among the Company, Grafiti LLC, and Grafiti Group, as amended (the “Equity Purchase Agreement”), shall be deemed to be satisfied in full and no further amounts shall be payable to the Company by Grafiti Group or any of its affiliated parties pursuant to the Equity Purchase Agreement; (ii) to deliver a cash amount of $ 60,000 (the “Outstanding Amount”) to Mr. Ali by wire transfer of immediately available funds; and (iii) to deliver $ 1,500,000 (the “Deferred Amount”) by wire transfer of immediately available funds in three equal installments of $ 500,000 each on June 30, 2025, September 30, 2025 and December 30, 2025. Any installment amount that is not paid by the applicable due dates will be subject to interest at a rate of 18 % per annum. Upon payment of the Outstanding Amount and the Deferred Amount in accordance with the terms of the Settlement Agreement, the Ali Advisory Fees shall be deemed to be satisfied in full and no further amounts shall be payable by the Company to Mr. Ali or his affiliated parties pursuant to the Ali Consulting Agreement. On March 31, 2025, the Company paid the Outstanding Amount of $ 60,000 in full. On June 30, 2025, the Company paid the first $ 500,000 installment of the Deferred Amount. On September 30, 2025, the Company paid the second $ 500,000 installment of the Deferred Amount. As of September 30, 2025, a Deferred Amount of $ 500,000 remained outstanding. ● Former Management Payments. Pursuant to the Settlement Agreement, the Company agreed to pay the Former Management Payments (as defined below) on the earlier of (a) the closing date of the Company’s next financing transaction and (b) 30 days following the Effective Date of the Settlement Agreement, subject to certain penalties for late payment. The “Former Management Payments” comprise (i) an aggregate amount of $ 803,260.65 that, as of the Effective Date, remained payable to the recipients of bonuses payable pursuant to the Strategic Transaction Bonus Plan together with (ii) an aggregate amount of $ 303,372.87 that, as of the Effective Date, was payable to Wendy Loundermon, the Company’s former Chief Financial Officer and a former director of the Company, pursuant to that certain Consulting Agreement, dated March 12, 2024, by and between the Company and Ms. Loundermon. On March 31, 2025, the Company paid the Former Management Payments in full. 32 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ● Preferred Stock Redemption. Pursuant to the Settlement Agreement, on the Effective Date, the Company delivered the aggregate amount of approximately $ 1.3 million (the “Series 9 Redemption Amount”) to Mr. Ali for the redemption of 1,164.12 shares of Series 9 Preferred Stock outstanding as of such date. Following Mr. Ali’s receipt of the Series 9 Redemption Amount, Mr. Ali no longer held any shares of Series 9 Preferred Stock. ● Mutual Release. As of the Effective Date, Mr. Ali, on behalf of himself and his former and current affiliated entities, including 3AM, Grafiti LLC and Grafiti Group (collectively, the “Ali Parties”) agreed to release the Company from all claims arising out of any obligations of the Company with respect to the Ali Consulting Agreement, that certain securities purchase agreement, dated as of March 12, 2024 (the “Series 9 Purchase Agreement”), by and between the Company and 3AM, and the portion of the Strategic Transaction Bonus Plan relating to Mr. Ali, from the beginning of time through and including the date on which the Company has delivered all payments due under the Settlement Agreement (the “Completion Date”). As of the Effective Date, the Company agreed to release the Ali Parties from all claims arising out of any obligations of the Ali Parties with respect to the payment of the purchase price as set forth in the Equity Purchase Agreement, the Ali Consulting Agreement, the Series 9 Purchase Agreement and the portion of the Strategic Transaction Bonus Plan relating to Mr. Ali, from the beginning of time through and including the Completion Date. ● Entire Agreement . The Settlement Agreement provides that it supersedes any prior consents or agreements regarding the allocation of financing proceeds for the payment of any obligations of the Company described in the Settlement Agreement. Grafiti Group Divestiture On February 21, 2024, Legacy Inpixon completed the disposition of the remaining portion of the Shoom, SAVES, and Game Your Game business lines and assets in accordance with the terms and conditions of the Equity Purchase Agreement. Pursuant to the terms of the Equity Purchase Agreement, Grafiti Group acquired 100 % of the equity interest in Grafiti LLC, including the assets and liabilities primarily relating to Legacy Inpixon’s SAVES, Shoom and Game Your Game business, including 100 % of the equity interests of Inpixon India, Grafiti GmbH (previously Inpixon GmbH) and Game Your Game, Inc., from the Company for a minimum purchase price of $ 1.0 million to be paid in two annual cash installments of $ 0.5 million due within 60 days after December 31, 2024 and 2025 (the “Grafiti Purchase Amount”). The purchase price and annual cash installment payments were to be (i) decreased for the amount of transaction expenses assumed; and (ii) increased or decreased by the amount of working capital of Grafiti LLC on the closing balance sheet is greater or less than $ 1.0 million. As of December 31, 2024, $ 0.5 million of the receivable is included in current assets as other receivables on the Company’s condensed consolidated balance sheets, and the remaining $ 0.5 million of the receivable is included in long term assets as other assets on the Company’s consolidated balance sheets. Pursuant to the Settlement Agreement dated March 27, 2025 (see “ Settlement Agreement ” above in this note), the Company agreed that, effective as of the Effective Date of the Settlement Agreement, the Grafiti Purchase Amount shall be deemed to be satisfied in full and no further amounts shall be payable to the Company by Grafiti Group or any of its affiliated parties pursuant to the Equity Purchase Agreement. As such, there are no receivables due from Grafiti Group or any of its affiliates reported in the Company’s condensed consolidated balance sheets as of September 30, 2025. Note 17 - Commitments and Contingencies Advisory Agreement On May 13, 2025, the Company entered into an advisory agreement with a third-party advisor, pursuant to which the Company agreed to pay $ 85,000 in cash and issue 125,000 shares of restricted common stock, subject to certain registration rights, to the advisor in consideration for financial advisory services agreed to be rendered to the Company pursuant to the advisory agreement. During the three months ended June 30, 2025, the Company paid the $ 85,000 cash fee and issued 125,000 shares of common stock to the third-party advisor. Fifty percent of the initial cash fee payment, or $ 42,500 , was subsequently waived and returned to the Company as part of the June Offering closing. 33 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In addition, the Company agreed to reimburse the advisor for all reasonable travel and other out-of-pocket expenses incurred in connection with the advisory agreement up to a maximum of $ 15,000 , subject to certain exceptions. The Company also agreed to: (1) pay the advisor a customary fee tail during the 12-month period following the termination or expiration of the advisory agreement, if applicable; (2) pay an M&A cash fee to the advisor during the term equal to 3 % of the aggregate consideration to the extent the Company enters into a merger or acquisition with a party initially introduced by the advisor to the Company; and (3) indemnify the advisor in in accordance with the terms and conditions of the advisory agreement. The advisory agreement has a term of 180 days, subject to early termination or further extension, each upon the mutual consent of the parties. Litigation From time to time, the Company is subject to various claims, charges and litigation matters that arise in the ordinary course of business. The Company records a provision for a liability when it is both probable that the loss has been incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be reasonably estimated, it discloses the possible loss or range of loss. Any potential gains associated with legal matters are not recorded until the period in which all contingencies are resolved and the gain is realized or realizable. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. Except if otherwise indicated, it is not reasonably possible to determine the probability of loss or estimate damages for any of the matters discussed below, and therefore, the Company has not established reserves for any of these matters. Xeriant Matter On December 6, 2023, Xeriant, Inc. (“Xeriant”) filed a complaint in the United States District Court for the Southern District of New York against Legacy XTI, two unnamed entities, and five unnamed individuals. On January 31, 2024, Xeriant filed an amended complaint adding the Company as a defendant. On February 29, 2024, Xeriant filed a second amended complaint, removing the Company and one of the unnamed entities as defendants. The second amended complaint alleges that Legacy XTI breached several agreements with Xeriant, including a Joint Venture Agreement dated May 31, 2021, a cross-patent license agreement, an operating agreement, and a letter dated May 17, 2022, which Xeriant claims arose from its introduction of Legacy XTI to a Nasdaq-listed company as a potential acquirer. Xeriant further alleges that it provided intellectual property, expertise, and capital in connection with Legacy XTI’s TriFan 600 aircraft and was improperly excluded from a subsequent transaction involving the TriFan 600 technology as part of Legacy XTI’s merger with the Company. Xeriant asserts causes of action for breach of contract, fraud, unjust enrichment, and misappropriation of confidential information, and seeks damages in excess of $ 500 million, along with injunctive and other equitable relief. On March 13, 2024, Legacy XTI moved to dismiss portions of the second amended complaint. The Court denied that motion on January 14, 2025. Legacy XTI filed its answer on January 28, 2025, and subsequently filed an amended answer and counterclaims on February 18, 2025. The amended counterclaims, further amended on April 14, 2025, allege that Xeriant breached the Joint Venture Agreement by failing to make required capital contributions of approximately $ 4.6 million and by failing to deliver promised intellectual property and strategic support. Legacy XTI further alleges that Xeriant breached its fiduciary duty by engaging in coercive and self-dealing conduct, including conditioning a strategic introduction on the issuance of equity and the assumption of debt. Legacy XTI seeks declaratory relief confirming that the joint venture has been terminated, that all intellectual property related to the TriFan 600 belongs solely to Legacy XTI, and that Xeriant has no rights in the TriFan 600 technology. On April 28, 2025, Xeriant moved to dismiss XTI’s second amended counterclaims. On September 23, 2025, the Court denied Xeriant’s motion, concluding that XTI plausibly alleged claims against Xeriant for breach of contract, breach of fiduciary duty, and declaratory judgment. The Court found that XTI had adequately pleaded that Xeriant was obligated to contribute $ 10 million in funding to the joint venture and that it acted disloyally by leveraging a potential merger opportunity for its own benefit. On July 10, 2025, XTI filed a letter motion requesting a conference to address: (i) ongoing deficiencies in Xeriant’s discovery responses; and (ii) Xeriant’s untimely service of discovery requests on XTI, which were served more than three months after the applicable deadline. The Court granted XTI’s letter motion the same day, and held a conference on July 18, 2025. During the conference, the Court ordered: (i) an extension of all discovery deadlines by three months, through November 24, 2025; (ii) an extension of expert discovery through February 16, 2026; and (iii) that the parties finalize a protective order and Electronically Stored Information (“ESI”) protocol by July 25, 2025. The parties subsequently submitted a stipulated protective order and ESI protocol, which the Court entered on July 28, 2025. On September 10, 2025, XTI filed a second letter motion to compel discovery based on Xeriant’s ongoing failure to comply with its discovery obligations, including its refusal to engage a qualified e-discovery vendor and produce electronically stored information in accordance with the Court-ordered ESI Protocol. By order dated October 23, 2025, the Court granted XTI’s motion and compelled Xeriant to conduct ESI discovery in compliance with the ESI Protocol, warning that continued noncompliance could result in dismissal of Xeriant’s case. 34 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Auctus Matter In connection with the “Xeriant Matter” described above, on June 12, 2024, the Company received correspondence from legal counsel for Auctus Fund, LLC (“Auctus”), dated April 3, 2024, asserting that the Company and/or Legacy XTI may have assumed Xeriant’s obligations under a Senior Secured Promissory Note (the “Note”) issued by Xeriant to Auctus in the original principal amount of $ 6,050,000 , pursuant to a letter agreement dated May 17, 2022, between Xeriant and Legacy XTI (the “May 17 letter”). Auctus claimed that the outstanding amount due under the Note, including accrued interest, was $ 8,435,008.81 as of April 3, 2024. In July 2024, Legacy XTI responded to Auctus’s claims, asserting that the May 17 letter is invalid and unenforceable on multiple grounds. Legacy XTI further stated that, even if the May 17 letter were enforceable, it did not create or trigger any obligation for Legacy XTI to assume Xeriant’s debt under the Note or otherwise. On May 13, 2025, Auctus filed a lawsuit against Legacy XTI in the District Court of Arapahoe County, Colorado, asserting a single claim for breach of contract based on its prior allegations. Auctus contends that Legacy XTI is contractually obligated to repay nearly $ 9 million in principal and accrued interest, based on Legacy XTI’s entry into a loan agreement with Legacy Inpixon in March 2023 and its subsequent merger with Legacy Inpixon in March 2024. On June 25, 2025, Legacy XTI filed a motion to dismiss or, in the alternative, to stay the proceedings pending resolution of the Xeriant litigation. Legacy XTI’s motion asserts that Auctus’ complaint should be dismissed: (i) for lack of standing, because Auctus is neither a party to, nor a third-party beneficiary of, the May 17 letter; (ii) for failure of a condition precedent, because no obligation ever arose in that the alleged triggering condition—a business combination involving Legacy XTI and Legacy Inpixon did not occur within the required one-year time frame; (iii) for lack of valid assignment, because Xeriant’s unilateral assignment of debt to Legacy XTI is void because the underlying Note prohibits assignment without Auctus’s prior written consent, which is not alleged. On August 5, 2025, Auctus filed a response arguing that it was an intended third-party beneficiary of the May 17 letter, that the anti-assignment clause does not bar its claims, and that the request for a stay is unwarranted because the Xeriant litigation involves different parties and broader claims. On September 12, 2025, Legacy XTI filed a Reply Brief reinforcing that Auctus lacks standing, that no obligation ever arose under the May 17 Letter because no qualifying transaction occurred within its one-year term, and that any purported transfer of debt is void under the Note’s anti-assignment clause. The Reply also emphasized that the enforceability of the May 17 Letter is already before the Southern District of New York and urged dismissal or a stay to avoid inconsistent rulings. On October 2, 2025, Legacy XTI filed a Notice of Supplemental Authority submitting the September 23, 2025 Order of the U.S. District Court for the Southern District of New York, which denied Xeriant’s motion to dismiss Legacy XTI’s counterclaims and held that XTI had plausibly alleged that the May 17 Letter expired by its terms and is unenforceable. Legacy XTI asserted that the SDNY ruling directly supports dismissal or a stay because it confirms that the same alleged contract and issues raised by Auctus are already being adjudicated in the federal case. On November 7, 2025, the court denied Legacy XTI’s motion to dismiss or, in the alternative, stay the proceedings. The court held that, when viewing the allegations in the light most favorable to Auctus, the complaint plausibly stated claims for relief under Colorado’s notice-pleading standard. The court further denied XTI’s alternative request for a stay, reasoning that the parties were not identical to those in the federal action and therefore comity and judicial economy did not warrant a stay. The court nonetheless directed the parties to update it regarding the outcome of the federal case to the extent it may be dispositive of overlapping issues. Legacy XTI’s answer to the complaint is due November 21, 2025. The Company will continue to vigorously defend against the claims but cannot predict the timing or outcome of the proceedings or estimate any potential exposure. No accrual has been recorded for the Xeriant and Auctus matters as at this time, management cannot reasonably estimate the possible loss or range of loss. Should circumstances change, the Company will record an accrual in the period such determination is made. Settlement Agreement with Chardan On or about August 1, 2024, Chardan Capital Markets LLC (“Chardan”) commenced an arbitration (the “Arbitration”) before the Financial Industry Regulatory Authority against the Company and Legacy XTI, related to an engagement letter, dated as of June 7, 2022, by and between Chardan and Legacy XTI, as amended (the “Engagement Letter”). On or about June 13, 2025, Legacy XTI filed a counterclaim against Chardan for breach of contract. On July 8, 2025, Chardan, on the one hand, and the Company and Legacy XTI, on the other hand, entered into a settlement agreement (the “Chardan Settlement Agreement”), pursuant to which the parties agreed to resolve and settle all claims and matters between them. Pursuant to the Chardan Settlement Agreement, simultaneous with the execution thereof, (i) Chardan, the Company and Legacy XTI entered into a mutual release, pursuant to which, Chardan, on the one hand, and the Company and Legacy XTI, on the other hand, released each other from all claims against each other, including all claims related to the Arbitration, and (ii) counsel for the parties executed a joint stipulation whereby Chardan and Legacy XTI agreed to dismiss with prejudice all claims asserted against each other with respect to the Arbitration, which was filed in the Arbitration. None of the parties made any payments in connection with the Chardan Settlement Agreement and, pursuant to the Chardan Settlement Agreement, the parties agreed that none of the parties owes each other any amount or debt. Pursuant to the Chardan Settlement Agreement, the parties also agreed that the Engagement Letter is terminated and is of no further force or effect. 35 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 18 - Net Loss Per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted loss per share attributable to common stockholders (in thousands, except share and per share data): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Net Loss $ ( 13,446 ) $ ( 4,435 ) $ ( 47,176 ) $ ( 21,747 ) Less: Preferred stock return — ( 185 ) ( 29 ) ( 496 ) Less: Deemed dividend — ( 54 ) — ( 514 ) Net Loss Attributable to Common Stockholders, Basic and Diluted $ ( 13,446 ) $ ( 4,674 ) $ ( 47,205 ) $ ( 22,757 ) Net Loss Per Share, Basic and Diluted $ ( 0.61 ) $ ( 33.40 ) $ ( 4.33 ) $ ( 308.53 ) Weighted Average Shares Outstanding, Basic and Diluted 22,065,141 139,944 10,914,152 73,759 The basic earnings per share calculation for the three months ended September 30, 2025 included 1,925,000 shares of common stock issuable upon exercise of Pre-funded Warrants that were issued in connection with the September Offering. The basic earnings per share calculation for the nine months ended September 30, 2025 included 2,176,000 , 2,911,800 , and 1,925,000 shares of common stock, respectively, issuable upon exercise of Pre-funded Warrants that were issued in connection with the March Offering, June Offering, and September Offering. These Pre-funded Warrants are considered penny warrants as the exercise price is $ 0.001 ; therefore, they are included in the basic earnings per share calculation. The basic earnings per share calculation for the three months ended September 30, 2024 included 839 penny warrant shares, since the exercise price was $ 0.01 per share. The basic earnings per share calculation for the nine months ended September 30, 2024 included 2,434 penny warrants shares. Additionally, the basic earnings per share calculation for the nine months ended September 30, 2024 included 1,194 shares of common stock that were issuable to Xeriant related to the joint venture arrangement that expired by its term on May 31, 2023. The shares were issued to Xeriant for no additional consideration immediately prior to the XTI Merger. The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 Options 2,914,464 51,274 1,015,818 23,165 Warrants 13,409,149 1,116 5,575,262 1,828 Convertible preferred stock 2 2 2 2 Convertible notes — — — 1,383 Total 16,323,615 52,392 6,591,082 26,378 Note 19 - Subsequent Events Management has evaluated subsequent events through the date of issuance of this Quarterly Report on Form 10-Q. Warrant Exercises Subsequent to September 30, 2025, 1,925,000 Pre-funded Warrants from the September Offering were exercised at an exercise price per share of $ 0.001 , resulting in the issuance of 1,925,000 shares of common stock. As of the date of this report, there are no Pre-Funded Warrants from the September Offering remaining. 36 XTI AEROSPACE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Valkyrie Investment and the Vanguard Platform On October 27, 2025, the Company and Valkyrie Sciences Holdings LLC (“Valkyrie”), a company developing enterprise solutions via the integration of artificial intelligence and advanced materials, announced the Vanguard Platform, an intelligent technology system for the next generation of VTOL aircraft. The Vanguard Platform will apply Valkyrie’s experience with graphene and composite materials, battery technology, and smart systems architecture to the Company’s TriFan 600 program. In connection with this collaboration, on October 21, 2025, the Company made a $ 2 million strategic investment in Valkyrie through the purchase of a convertible promissory note (the “Valkyrie Note”) with an initial principal amount of $ 2 million issued by Valkyrie. Valkyrie and its affiliate Valkyrie Andromeda Corporation (together with Valkyrie, the “Borrower”) are jointly and severally liable under the Valkyrie Note. Interest accrues on the outstanding principal amount at the lesser of 10 % per annum or the maximum rate permissible by law. The outstanding principal amount, together with any accrued but unpaid interest, is due and payable on December 31, 2026 (the “Maturity Date”). After a Qualified Financing (as defined in the Valkyrie Note) and if the Company does not elect to convert the Valkyrie Note, the Company may, prior to the Maturity Date, elect to require the Borrower to pay the remaining balance of the Valkyrie Note within 60 days after the delivery of the election notice to Valkyrie. Acquisitions of Drone Nerds and Anzu Robotics On November 10, 2025, XTI Drones Holdings, LLC (“XTI Drones Holdings”), a subsidiary of the Company’s wholly-owned subsidiary, XTI Drones, LLC, acquired 100 % of the issued and outstanding equity interests of two enterprise drone solutions providers, Drone Nerds, LLC (“Drone Nerds”), a Florida limited liability company, and Anzu Robotics, LLC (“Anzu Robotics”), a Delaware limited liability company (the “Acquisition”) for total purchase consideration of $ 40.0 million, which was comprised of $ 20.0 million in cash, $ 11.9 million in the form of two promissory notes (including approximately $ 1.6 million in working capital adjustments), and $ 9.7 million in the form of equity consideration, specifically an aggregate of 6,524,576 Class B Units of XTI Drones Holdings (the “Class B Units”). Drone Nerds is one of the largest drone distributors and solutions providers in the United States. Drone Nerds specializes in the wholesale, retail and e-commerce sale of advanced drone systems and related technologies serving commercial, governmental, and consumer markets, including public safety, construction, energy, and agriculture. The company operates both an online sales platform and a retail location in South Florida and maintains one of the largest drone inventories in the U.S., representing over 30 leading brands. Through its nationwide network of sales, marketing, and service professionals, Drone Nerds delivers comprehensive enterprise drone solutions that improve operational performance and data-driven decision-making for its customers. The Class B Units of XTI Drones Holdings are exchangeable at any time after May 1, 2026 for shares of the Company’s common stock on a one-for-one basis, provided that such exchange ratio is subject to equitable adjustments for stock splits, stock dividends, reclassifications and similar transactions affecting the Company’s common stock. In addition, on the date that is 15 months after November 10, 2025, all outstanding Class B Units will automatically be exchanged for shares of the Company’s common stock on a one-for-one basis, subject to the foregoing adjustments. The Drone Nerds and Anzu Robotics sellers entered into lock-up agreements pursuant to which they agreed not to, without the Company’s prior consent, sell, transfer or dispose of any shares of common stock until November 10, 2026. Following the exchange of all outstanding Class B Units into shares of common stock, XTI Drones, LLC will own 100 % of the membership interests of XTI Drones Holdings, and Drone Nerds and Anzu Robotics will be indirect, wholly-owned subsidiaries of the Company. The Company incurred fees of approximately $ 1.2 million owed to ThinkEquity LLC as compensation for advisory services in connection with the Acquisition. Issuance of Series 10 Convertible Preferred Stock On November 10, 2025, the Company entered into a Securities Purchase Agreement with Unusual Machines, Inc. pursuant to which the Company issued Unusual Machines, Inc. 25,000 shares of Series 10 Convertible Preferred Stock, par value $ 0.001 per share (the “Series 10 Preferred”), at a stated value of $ 1,000 per share, for aggregate gross proceeds of $ 25.0 million in a private placement that closed on November 12, 2025. The Company received net proceeds from the Series 10 financing of approximately $ 23.1 million, after deducting the placement agent fees and other expenses payable by the Company of approximately $ 1.9 million. The Series 10 Preferred carries a 12 % cumulative dividend, payable quarterly in cash, common stock, or in kind through accretion to stated value; provided that the payment of the dividend in common stock is subject to the receipt of shareholder approval. The right to such preferential dividend expires on the two-year anniversary of the original issuance date of the Series 10 Preferred. Each share will be convertible into common stock at a conversion price of $ 1.492 per share, subject to adjustment as set forth in the Series 10 Preferred certificate of designation (the “Certificate of Designation”), upon receipt of shareholder approval, at which time all shares will automatically convert. Conversions are subject to a beneficial ownership limitation of 4.99 % (or 9.99 % at holder election). If conversion would exceed such limit, the Company may, at the election of the holder, issue pre-funded warrants in lieu of conversion shares or such shares will be held by the Company in abeyance for the benefit of such holder. The Series 10 Preferred includes a Fundamental Transaction clause providing that holders receive equivalent consideration on the same basis as common shareholders. The Series 10 Preferred has no redemption rights and may be settled only through equity conversion. The Series 10 Preferred has no voting rights, except as required by law and for certain customary protective provisions set forth in the Certificate of Designation. ThinkEquity acted as the Company’s placement agent in connection with the Series 10 Preferred financing. As compensation, the Company paid ThinkEquity $ 1,750,000 of placement agent fees, reimbursed ThinkEquity for $ 175,000 of actual out-of-pocket offering expenses, and issued ThinkEquity and its designees warrants to purchase an aggregate of 837,801 shares of common stock at an exercise price of $ 1.492 per share, equal to the Series 10 Preferred conversion price. The warrants were immediately exercisable upon closing and expire five years from the date of issuance. The Company’s obligation to issue shares upon exercise of the warrants is subject to its receipt of shareholder approval. If a holder exercises its warrants prior to the date that shareholder approval is obtained, such holder will receive the right to receive on the shareholder approval date the number of shares of common stock so issuable upon such exercise and, on the shareholder approval date, the Company will issue such shares to such holder. 37