Company: XTIA
Filing Date: 2025-05-19
Form Type: 10-Q
Source: 0001213900-25-045396
Chunk: 133

Company: XTI Aerospace, Inc.
Filing Date: 2025-05-19
Form: 10-Q
Item: Part I, Item 8
Chunk 133
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 closing of the March Offering, the Company issued the Representative,
as partial compensation, warrants (the “Representative’s Warrants”) to purchase up to 147,060 shares of common stock.
The Representative’s Warrants have an exercise price of $1.70 per share. The Representative’s 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.

Similar to the Placement Agent Warrants described above in this note section, the
Representative’s Warrants issued in connection with the March Offering were determined to be temporary equity under ASC 718 and
therefore reported in “Mezzanine Equity” on the Company’s condensed consolidated balance sheets, and the Common Warrants
and Pre-funded Warrants were determined to be liability classified. The Common Warrants and Pre-funded Warrants were recognized at fair
value at issuance, with the change in fair value of approximately $0.5 million reported in “change in fair value of warrant liability”
on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2025.

The measurement of fair value of the Representative’s Warrants 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 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%).

27

XTI AEROSPACE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The March 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 is summarized below and is reflected as temporary equity (“Mezzanine Equity”) for the Representative’s Warrants,
a warrant liability for the Common Warrants and Pre-funded Warrants, and within additional paid-in capital for the common stock