Company: XTIA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112615
Chunk: 222

Company: XTI Aerospace, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 222
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 the costs necessary to complete the design, development, certification, and manufacturing of our TriFan
600 airplane due to the inherently unpredictable nature of our research and development activities. Development timelines, the probability
of success, and development costs may differ materially from expectations.

Sales and Marketing Expenses

Sales and marketing costs
include activities such as aircraft reservation procurement, brand awareness campaigns, public relations and business opportunity advancement.
These functions mainly generate expenses relating to travel, trade show fees and costs, salaries and benefits. Sales and marketing expenses
are expensed as incurred.

General and Administrative Expenses

General and administrative
expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, and
administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, including
non-capitalizable transaction costs; professional fees for accounting, auditing, tax and administrative consulting services; insurance
costs, facility related expenses including maintenance and allocated expenses for rent and other operating costs.

We anticipate that general
and administrative expenses will increase substantially in the future as we increase our headcount to support continued research and
development and commercialization of the TriFan 600.

43

Other (Expense) Income

Interest expense, net consists
primarily of (i) interest relating to convertible and promissory notes payable, (ii) amortization of debt discounts relating to warrants
and stock options issued in conjunction with convertible notes, and (iii) interest income on notes receivable.

Loss on extinguishment of
debt includes (i) prepayment penalties and other expenses incurred during the nine months ended September 30, 2025 as the Company fully
repaid the Streeterville promissory notes before the maturity date, and (ii) inducement losses on debt conversions incurred by Legacy
XTI when it entered into voluntary note conversion letter agreements with several note holders during the first quarter of 2024.

Change in fair value of convertible
notes payable represents the remeasurement of certain Legacy XTI convertible notes to fair value. These notes were converted to equity
prior to the closing of XTI Merger.

Change in fair value of warrant
liability represents the remeasurement of certain outstanding warrants to fair value.

Other consists of miscellaneous
income and expense items.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2025 compared
to the Three Months Ended September 30, 2024

The following table sets
forth selected consolidated financial data and as a percentage of period