Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 189

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 189
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 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,